What are pre-registered cars?
A pre-registered car (or pre-reg) is exactly that; a car that has never been owned or driven by a normal member of the public (known as an end-user in dealer speak) but has been registered to a dealer, broker or leasing company.
From the day a car is registered it becomes a used car, even if it has never moved from the moment it landed at the dealership or even if it is still at the factory compound!
Why do cars get pre-registered?
To explain, you have to understand what constitutes the sale of a new car.
Despite what many people think, profit margins on most new cars, especially mass market cars, are very low.
Often, dealers get incentive payments from their manufacturer on top of normal profit margins – these incentive payments usually require hitting targets.
Most manufacturers don’t care if the cars have been sold to a customer or if they are still sitting in the compound having only been through a paperwork registration exercise. As long as the car has been registered with the DVLA it is considered as being sold; the dealer then has to pay for it and it is no longer the manufacturer’s stock.
Usually, there are different levels of bonus that kick in as the dealer reaches different sales thresholds in that quarter of the year.
The bonus payments dealers receive can be worth enough money that they are prepared to register the cars to themselves, and then sell them off to end-users (customers like you and I) as pre-registered models and still make more than they would have under normal circumstances.
When do cars get pre-registered?
Cars normally get pre-registered in the first and third quarters of the year because they are the two quarters when the new registration plates come in. March and September are therefore the two biggest months for new car sales because people want the newest registration numbers, but it also means that dealers have the biggest targets to hit in these months.
If a dealer or dealer group is not going to hit its targets and trigger the bonuses through normal sales, it can often make sound financial sense to register some cars to hit the targets and worry about selling them later.
Is a pre-registered car a good deal?
A dealer cannot sell a pre-reg car as a brand-new one, which means it is going to be cheaper to buy.
Whereas a demonstrator will probably have been used to demonstrate to customers and as a company car for a member of staff, a pre-reg car will be exactly the same as a brand-new one. That is, of course, apart from the fact that you will be the second owner on the registration document rather than the first.
If you are fully aware of what you are buying then a pre-registered car can be a good deal, especially if the dealer has a lot of them to sell, has had them for a while and is prepared to offer even bigger discounts to get them sold.
Just be aware that finance deals on brand-new cars can sometimes be good enough to make buying new cheaper than buying a pre-reg car – do your research first!
Is there a down side?
You’re getting what to all intents and purposes is a new car, but for the price of a used one. While it isn’t quite as good as getting a totally new car for reasons we’ll go into shortly, it’s certainly better than buying a demonstrator that really is a used car.
The one thing you need to be aware of above all else is that you are buying a used car and that has repercussions for the eventual resale value when it’s time to change it.
You pay less for it initially, but you’ll also get less for it when you sell because it will have two owners rather than one if you had bought it brand new.
If you are financing the car, you also need to be aware that the finance deal will reflect the fact that it isn’t new. If you are buying on a PCP or balloon HP, the deferred payment will be lower than it would be if you had bought new and that could result in higher monthly payments.
However, if you are leasing or contract hiring the car it makes no difference whatsoever because you never have to worry about its resale value.
Most car dealers don’t deserve the ‘Arthur Daley’ wheeler-dealer image that people still apply to them. It’s highly unlikely that any main dealer would try to pass a pre-registered car off to you as a brand new one.
However, if you are buying through a broker, and especially if the deal seems too good to be true, make sure that you clarify that you will be the first owner on the log book before you sign anything or hand over any money. You have been warned!