• Home
  • Car Blog
  • Pre-registered cars by dealers: Why we don’t recommend them

Pre-registered cars by dealers: Why we don’t recommend them

Pre-registered cars by dealers: Why we don’t recommend them

2 September 2022 Concept Car

We only recently noticed that we never posted anything about pre-registered cars on our blog. Big deal, you might say. Why waste your time writing about what is clearly a niche product?

Well, for one, because they seem like a great deal. Some experts claim that you can slash a minimum of 10-15% off the list price when it comes to a pre-registered car. And sometimes, you can even get 30%. If these numbers are anything to go by, it would be foolish not to at least take pre-regs into consideration.

Secondly, pre-regs are no longer a niche phenomenon by any means. In fact, according to current statistics, they make up 30% of new car sales in the UK!

That’s an impressive number. So clearly, it makes sense to take a closer look at them.

Does it sound too good to be true? Maybe it is!

We’ve gotten used to the pitfalls of miracle offerings – the 0% deals, the easy finance packages, the radical price drops. So we’re often no longer prepared to trust car dealers even if they are entirely honest.

Pre-registered cars fall somewhere in between the extremes. They are certainly a tiny bit shady. But there is absolutely nothing illegal about them. Nor should there be. In the overall spectrum of car buying, they offer you a welcome alternative to either buying a brand new vehicle at full price or a second hand car at much reduced cost.

The closer you look, the less spectacular the promises of a pre-reg sound and the more interesting it becomes. Is it preferable to the two traditional methods mentioned above? Let’s find out.

What, exactly, is a pre-registered car?

A pre-reg is a car that is technically no longer new, but may not actually have used yet. Some typical characteristics include the following:

  1. The car has been standing idly on the car lot and has not been driven.
  2. It will typically be only a few months old.
  3. In some cases, a pre-reg can also be a demonstrator. Meaning: it has been used as a vehicle for test drives and for demonstration purposes in the showroom.
  4. The car has already been registered. This is the main difference between a new car that hasn’t been registered and has simply not been sold yet and a pre-reg.

As you can see, it does look somewhat strange that the dealer should be storing away some of his stock for later selling at a much reduced price. After all, car dealers are not typically known for giving away money for nothing.

So here’s the question:

Why do dealers sell pre-register cars in the first place?

To understand the argument for pre-regs, you need to understand how car dealers make money.

Dealers don’t make most of their money through selling new cars. Although the trade is lucrative, second hand cars are usually a lot more interesting when it comes to pure profit margins than new cars.

What really makes dealers money are the bonuses doled out by manufacturers. These depend on sales figures for the quarter and the overall sales for the entire year. The more cars a dealer can sell, the higher his bonuses. Taken together, these can add up to quite impressive numbers.

The problem is that sales targets are sometimes impossible to reach through conventional methods. Some models simply don’t perform that well. They may not be as good as the competition, may not meet customer tastes or they can be overpriced.

To move these models, dealers will pre-register them to make sure they don’t loose out on their bonuses.

Why does pre-registering make a difference?

Here’s something you may not have known yet: Sales statistics depend on the number of registrations, not the number of actual sales. Whether or not that’s a sensible concept is open to discussion. But it’s been that way for a very, very long time. And no one in the car industry is showing any intention of changing it anytime soon.

So, effectively, as soon as a dealer registers a car, he is declaring it sold. In terms of the bonus situation, he has now made a big step towards a healthy profit. He’ll get a bonus from the manufacturer no matter what.

He still needs to sell the car to a paying customer, however. Otherwise, he’d be buying a bonus at the cost of a car. So will not just randomly register all of his cars. Instead, he will focus on those models which he recognises as less promising or possibly cars he has too many of at the moment.

He will then wait a little while, before offering them as pre-regs to the public. If  he can sell them at a reasonable price, his overall profit can still be quite good. And the customer will be ideally be happy as well, having bought an unused car at a discount.

So are pre-registered cars effectively new?

If things were this easy, we wouldn’t be having this discussion. Unfortunately, they are quite a bit more complex.

Yes, a pre-registered car has not been used yet. And yes, there are genuinely ‘new’ cars which have been standing on the dealer’s premises for longer. Still, a pre-registered car isn’t ‘new’.

If it were, you would get the same warranty-conditions. But you don’t. Also, all pre-regs tend to fetch a little less on the resale market.

Why is this?

From the moment the dealer registers the model, the warranty starts kicking in. So if your pre-reg has been waiting for three months on the lot, that time goes off your warranty period.

That’s a first problem. But there’s more.

By registering the car, the dealer becomes the first owner. That’s not really a big deal in and of itself. But some buyers will consider this a deficit when you’re looking to sell the car again after a while. So you may make less on that sale compared to a regular brand new car.

Pre-reg versus demonstrator

At the same time, a pre-reg is decidedly more appealing than a demonstrator.  A demonstrator, after all, will have racked up quite a few miles. These cars are driven by many different people, each with their own particular style. And to test them, drivers subject them to a wide range of challenges. So you can expect these cars to neither look nor feel like new.

Technically speaking, a pre-reg is very similar. Still they are very different when it comes to their quality. Visually and technically, these cars are impossible to distinguish from a factory new one. The only miles on the odometer are those required to get it to the dealer’s lot.

A demonstrator need not be a bad deal per se. In terms of quality, it is no match whatsoever for a pre-registered car.

Benefits of a pre-registered model

Let’s now take a look at the concrete benefits of a pre-registered car. You can then compare these to the relative advantages of the other options at your disposal:

  • Leasing
  • Car pooling
  • Car subscriptions
  • Buying new
  • PCP
  • HCP
  • Buying second-hand

So here are the pros that make pre-regs so attractive for many buyers.

Potentially cheaper

The nominal price of a pre-reg is usually considerably lower than the list price of that same model. As we mentioned, that difference should be at least somewhere between 10-15%, more if you can get it. Alternatively, you can settle for a slightly lower percentage and try to get a few extras thrown in.

A pre-registered car will definitely be more expensive than a used car. It will also be more expensive than am ‘almost new car’. Although the latter are very rare, they’re great if you can find one. You should be able to get an even better price if you can find a 12-month old car.

We’ll explain the reason we’re referring to this as a ‘potentially’ cheaper option in a second. For now, let’s simply say that pre-regs can, in an ideal situation, put even expensive cars within reach of the average driver.

Still great value

There is absolutely nothing in objective terms that sets apart a new car from a pre-reg. If there is a difference, it’s in the mind. The only thing that makes a pre-reg less valuable is the fact that it has been registered before – and a new car hasn’t.

Since a pre-registered car hasn’t been used yet, it is new in every single respect. That’s a pretty great concept, if you ask us.

Fast delivery

If you want to buy new, you’ll need patience. To visit the dealer and drive off the lot in a new vehicle the same day is simply impossible. Cars are essentially produced on demand, especially since many customers prefer to customise them.

If you’re looking for a more spontaneous experience, a pre-registered model might be just what you’re looking for. Essentially, these cars are ready to go and can be yours as soon as the financing has been dealt with.

On the downside, you won’t be able to customise them as much as a new car. Whether or not that is a big deal or not, depends entirely on your personal preferences and needs, of course.

Let’s now turn towards the disadvantages of pre-regs. As incredible as these deals may sound, after all, there are always a few cons as well.

Older cars

As we mentioned, dealers are no charitable institutions. The reason they pre-register a few of their cars is because they don’t expect to be able to move them at the regular price.

What this means is that most pre-regs are not exactly the most exciting and popular cars out there. They can either be less appealing models by less appealing brands. Or they can be particular trim levels which the dealer and/or the public considers inferior.

Either way, these are usually less intriguing models – which will probably also translate to a lower resale value should you decide to part ways with it at some point.

Reduced warranty / second owner

We already hinted at this before: Although a pre-reg car has never been properly driven before, its warranty has already gone into effect the moment it was registered. And you’re not the first, but the second owner of the car.

We don’t believe these disadvantages are severe. After all:

  • The fact that you’re not the first owner of the car will probably reduce the resale value a little bit. But it won’t be much. Other factors, such as age, mileage and condition are far more important in this regard.
  • Cars these days usually last for a very long time. Very few of them ever encounter serious issues. It’s not that it couldn’t happen, but the likelihood has gone down considerably. Also, very few pre-regs are older than six months. So we’re not talking about an extreme loss of warranty here.

There is, however, a far more incisive argument to be made:

There are usually better deals than pre-regs.

It may be hard to believe. But after everything is said and done, pre-regs are usually not quite as cheap as you may believe.

For one, they’re obviously quite a lot more expensive than used cars. Even a one-year old model, as we’ve pointed out, is a lot cheaper. A three year old car, which will also still feel incredible and almost new, is going to be a lot cheaper still.

But even compared to a brand new car, a pre-registered model can sometimes turn out to be more expensive.

This is because

a) manufacturers will support the sales of new vehicles with special financing options. None of these apply to pre-regs.
b) very few customers ever pay the list price. In reality, dealers will almost always have deals on offer or cave in during haggling.
c) if you wait long enough, an incredible new car deal will almost always come around. If you put these side by side with a pre-reg, the latter will more often than not loose out.

Add to this the other disadvantages we mentioned and the case for a pre-registered car is no longer clear at all.

So is a pre-reg a bad idea?

We don’t recommend getting a pre-reg. Granted, it doesn’t necessarily have to end badly. You will find plenty of proponents of pre-registered cars online. To them, a pre-reg makes it possible to get a great, essentially new car at a reduced price. Some stress that pre-regs tend to be ‘fully loaded’ with extras and come at better trim levels. It is, however, highly doubtful this is true as a general rule.

If you have made up your mind and want to go pre-reg by all means, then make sure to at least follow the following precautions:

  • Make sure you buy at the best possible price level. A pre-reg should be considerably cheaper than a new car. And make sure there are really no cheaper alternatives available as part of a special deal.
  • Conduct a pre purchase vehicle inspection to avoid any grave issues.
  • Buy at the right time of year: March and September are best for pre-regs, as this is the time the new plates come in and dealers want to get rid of their inventory.
  • Make sure the formalities are correct. This includes the insurance – the dealer needs to transfer it to you and you should also get the current version of the documentation.

If you take these factors into consideration, you can at least make sure not to make any grave mistakes. Especially if you’re pressed for cash, however, nothing beats a second hand car. You may even get the ideal trim level and more choice here!

2 September 2022 Concept Car