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A dealer’s guide to pre-registration

Posted by Meg Bernazzani on December 4, 2019

Dealers are under constant pressure to hit sales targets, which leads many to pre-register cars in order to achieve what the manufacturer is asking of them. If it’s kept to a sensible amount and handled in a controlled fashion then there’s generally nothing wrong with it, but it can easily get out of hand and turn into an expensive headache for retailers. We explain the cons, the pros and how to deal with it.

The risks of pre-registration

It’s absolutely possible to make pre-registration profitable (more on that below), but there’s no escaping its negative connotations, as it can become a real problem for dealers when manufacturers are chasing market share and forcing them to take on more new cars than they can sell.

While their approaches vary depending on their aspirations, certain manufacturers are more aggressive than others when it comes to sales targets, and retailers representing particular brands can find themselves under serious and unrealistic pressure to hit them. That can leave no option but to register more cars to the dealership itself, then sell them at a discount at the earliest opportunity. If dealers hit their targets then they receive a bonus from the manufacturer, but if they don’t, then they’re faced with selling discounted vehicles without the extra bump from the OEM, which eats into their profitability.

It’s not always the case, but pre-reg tends to be at its most voracious when new car sales are strong and it was reputedly prolific in 2015 and 2016 when the market achieved record levels.

When is pre-registration a good thing?

Despite its negative connotations, there are circumstances in which pre-registered stock can be beneficial to dealers, the first of which is when the manufacturer is the one doing the pre-reg.

In this instance, the OEM will sell the vehicles to its own network at an attractive price, which means retailers get the first bite of the cherry for what is likely to be a selection of highly desirable used cars which they can sell at a good profit – and there’s nothing wrong with that.

In moderation, the practice can also be advantageous at the dealer’s level. If registering a car to the business allows you to hit a target to which a bonus is attached, then you’ve probably more than covered your costs. That then leaves you with a nearly-new car with no miles on the clock which can be sold to a retail customer at an attractive price but still at a profit, so both parties stand to gain. Keep it controlled and to a modest amount and it’s a practical, sensible way of shifting surplus stock and making more money while you’re at it.

How to handle pre-registrations

Dealers might not have much say over manufacturer sales targets, but there are techniques you can employ to mitigate the impact of pre-reg at the retail level. The main thing is to know how many pre-reg vehicles you’re selling and how frequently. Less is definitely better, as you certainly don’t want to reach a point where you’re depending on it to hit targets. Equally, the vehicles shouldn’t be forgotten about and end up as long-term demos.

Correct pricing will go a long way. A pre-reg model should not be competing with the bulk of your used car stock but it should be significantly discounted over a brand-new equivalent, rendering it attractive to buyers. Pair this with an attractive finance offer and a customer might find they can afford a better car than they first thought, while extra incentives for sales staff to shift pre-reg models can get them moving faster.

Finally, be conscious of when you’re selling pre-reg models and how close that is to new registration dates. A discounted car bearing a relatively new registration – i.e. in the wake of the March and September plate changes – is a big pull for buyers, but it’s less appealing and therefore harder to shift in the run up to those periods, so timing can be everything.