More interest in used car franchises

Interest from investors in pre-owned vehicle franchise dealerships is increasing, according to the WesBank-certified franchise InspectaCar.

Inspecta Car Klerksdorp

InspectaCar Finance joint venture head Jason White said they have received more than 110 inquiries during the past three months about pre-owned vehicle franchise dealerships, with more than 20 serious applicants converting the inquiry process into a franchise.

“There are seven interested parties who are currently operational in the retail dealer environment. This is hugely encouraging as these investors have in depth knowledge of this unique industry,” he said.

InspectaCar CEO Pertunia Sibanyoni said there were not any InspectaCar franchise closures since lockdown last year.

With the exception of two dealerships that parted ways amicably with the franchise and the new dealerships that opened their doors in the past four years, InspectaCar franchisees have been with the franchise business from its inception in 2002 or have owned InspectaCar franchises for more than 10 years, she said.

Sibanyoni said InspectaCar is fully committed to assisting and supporting its franchisees through both good and difficult times.

“The pandemic and resultant financial pressures meant that we as a franchisor needed to think creatively about how we were going to support our valued partners.

“The first decision we made when lockdown came into effect was to waiver franchise fees for a certain period of time.

“We actively provided our franchises with ongoing critical information to keep their businesses going, including financial relief packages, as well as specific documentation and advisories on how to operate safely in the lockdown,” she said.

White added that the increased interest in a franchise is from a mixture of existing InspectaCar dealers, who are keen to increase their offering in other regions, and new investors who want to convert their independent used car dealership to a reputable brand.

“The biggest interest so far has come from entrepreneurs. This is attributable to stakeholders looking for new opportunities in the market and the used car market is understandably the area to move into,” he said.

The increased interest in the pre-owned vehicle franchise follows more consumers choosing to purchase pre-owned than new vehicles to save money in an uncertain economic environment, with rising household expenses, an unstable work environment and lingering Covid-19 uncertainty.

TransUnion SA’s vehicle price index report for the first quarter of 2021 revealed that the used-to-new vehicle ratio remained consistent during 2020 but rose to 2.4 in the first quarter of 2021 from 2.3 in the previous quarter.

It said financed demonstration models made up 6% of used vehicle finance deals, indicating that consumers are choosing older vehicles as pressure on disposable income increases.

TransUnion added that positive interest rate indicators and low inflation have pushed demand for quality used vehicles — not new vehicles — straining supply and causing the used vehicle pricing index to surpass inflation for the first time since the third quarter of 2010.

It said used vehicle prices increased by 3.7% in the first quarter of 2021 compared to the 3.1% rise in the consumer price index (CPI) in the same period.

“This trend will continue as demand for quality used vehicles continues without stable supply,” it said.

White said InspectaCar is optimistic about the outlook for the pre-owned market in 2021.

“While demand is currently higher than supply, we are hoping that this will improve in the coming months, turning this segment of the market around into a flourishing one for used car buyers,” he said.

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