'Pre-reg' accounts for up to one in five new cars
Up to a fifth of new cars sold in the UK are pre-registered to dealers, according to an investigation by BBC Radio 4's You and Yours.
These cars are sold cheaply by manufacturers to dealers, who register them under their own business name. After being kept off the road for 90 days, they can then be sold to consumers, typically at discounts of around 20%.
For manufacturers, it's a way of selling sell off surplus stock. And for dealers, pre-registration helps them achieve monthly sales targets set by the manufacturers. However, James Baggott, editor of Car Dealer magazine, said that many dealers become dependent on pre-registering cars.
"I refer to it as a drug but only because that's how a lot of dealers refer to it themselves. Once you are hooked into it, it is very hard to get off it," Baggott told You and Yours on Friday.
"We're constantly talking about how buoyant the car market is. But pre-registered cars are inflating the real car market, they are often just sitting in a field somewhere.
"I would say that isn't transparent enough because a number of people use the car industry as a bellwether for the economy."
A survey of 200 dealers found that 80 expected pre-registered vehicles to account for 11% to 20% of the new car market in September, and another 52 thought they would account for 21% or more of the market.
The investigation also revealed that many consumers don't understand the system and are unaware of the disadvantages of pre-registered cars -- for example, the buyer's name won't be first in the logbook, some of the manufacturers' warranty will have expired, and the best leasing deals may only be available on brand new cars.
But the Society of Motor Manufacturers and Traders (SMMT) responded by saying that pre-registration enables consumers to buy a new car immediately and with a very low mileage.
It also allows dealers to manage stock efficiently, the industry body said.