Wheeling and dealing for millionaires

Jaguar specialist
Between 1985-1992 he operated his own independent Jaguar dealership out of an industrial unit in Kingsbury, north west London.
“I bought them, I sold them, I repaired them, I modified them. I was really doing what main dealers didn’t want to do. At that time Jaguars were unreliable.”
His big break came in 1992 when he became a franchised dealer for Jeep.
“The dealership grew and I became the largest Jeep dealer in Europe. At the height of this, in about 1997-1999, we sold over 1,000 new cars per year from three showrooms”
He then added franchises for Jaguar and Rover, but gradually concluded he had too many doubts over the manufacturers’ long term intentions.
“I could see manufacturers were never going to give London dealers the kind of support they needed.”
“I saw the writing on the wall and sold Rover to HR Owen who turned it into a Ferrari dealership.”
He saw no future for his three Chrysler Group dealerships either and also disposed of Jaguar.
“What I found was that I had three franchises that eventually were the runt of the owner. In the case of Rover BMW spectacularly and sensibly got rid of it. With Jaguar I did the right deal at the time for me – I didn’t have the capacity to expand.”

Little manufacturer support
He felt that Chrysler would never provide the appropriate support for the business. “Whilst it made money it was OK. Once it started to lose money I could see that I had to make a decision, so I decided to get out of franchised retailing all together.”
He was not happy with manufacturers pushing their products by forcing sales quotas on dealers.
“In that situation in order to make any money on the first units you had to buy more units. So you had fully paid for cars that had to be pre-registered and sold in the following month. With the cost of space I knew I had to get out.”

Expedient sourcing
He became an independent dealer in 2004. The business process at Clive Sutton is now built on its ability to source premier marques quicker than waiting for manufacturers to deliver them direct.
“If you want to buy a Ferrari, an Aston Martin, a Lamborghini, a Bentley, a Rolls-Royce or a Porsche you come here, and what you do is see examples of those cars in one place.”
Customers that opt to buy such brands from a franchised dealer leave a deposit but then wait up to two years for delivery. By then circumstances can change.
“What I do is go into the market place and either buy contracts or cars. So for example if you want to buy a 430 coupe or 430 spider you can buy one today and drive it away, and we will charge a premium over the list price, depending on the market price.”
Customers line up to buy such cars a year before anyone making the order can. The franchise dealer can dictate the process as he has people lining up to buy. “If it is a good enough car, the dealer does not actually have to sell the car.”
Sutton explained this accounted for around half of the dealership’s business – providing immediate or very short term delivery.
“We read the market and make our own decisions. A manufacturer is not pumping us with a range of products – some of which are saleable and some which are not.”

Block exemption
Clive Sutton also buys Range Rovers from franchise dealers.
He explained there were hurdles to overcome because of the block exemption reseller clause: “Officially most dealer contracts say you can not sell to a re-seller. To get around this we often have to buy through the Clive Sutton finance division.”
Having put a deposit down on luxury cars, customers often change their mind. “Maybe they don’t want it anymore, maybe their business circumstances have changed, maybe they don’t want to admit that they can’t afford it.”
He continued: “So what we do is we wait in the market place and offer to step in. We supply the spec we want for the car, they order the car, and then we pay a certain figure to be given that order from the customer.”
Through its marketing, the internet, and its market awareness, Clive Sutton will have customers enquiring about immediate delivery of a Ferrari 599. “Typically, a car that is listed at £210-220,000 has a street price of £250-260,000.”
He said margins vary – he sold six 430 spiders in three months at around £170,000 when the list price was £150,000.
“We are working on a small margin as we pay a few thousand pounds to the person who got the order.”
Currently the Audi R8 is in demand. Sutton said the definitive moment was after Jeremy Carkson’s review of the car. “He gave it six stars out of 5. In such circumstances people who have the car on order usually either decide to keep it or opt for making some money out of it. We would now pay up to £5,000 to have that new car from a customer.”

Speculators
He said there were two types of speculators – the first being the very wealthy who have a fleet of a half-million pounds worth of cars. “After putting in their orders with the manufacturer they decide whether to keep them or try to dispose of them, and usually ask me if I can help!”
Sutton explained that these speculators balanced the depreciation on the cars they drive against the profit they make on the ones they sell. The dealership has developed relationships with 30-40 customers who continually chop and change cars.
Then there is the mid-market speculator who buys deposits on cars knowing full-well he or she is never going to take delivery on the car – they usually can not even afford to do so. “We are sitting in the back ground waiting to take his order.”
He described the mentality of buyers in this niche sector. “They have gone through the thrill of specking the car, they have gone to the factory, and the franchised dealer has spoilt the customer believing he will buy the car.”
He conceded the company does lose too in such a market – he bought some BMW M6’s but they did not do well and he had to sell them at a loss.
“The Bentley Coupe is yesterday’s fish and chips,” he added. “Currently the 997 Turbo Cabriolet, Massrati Gran Toreilio and the R8 are flavours of the month.”
Sutton gave an example of how the business runs. Recently a customer bought a Rolls-Royce from the Clive Sutton showroom for £322,000. After driving it for 2,000 miles the customer decided he wanted to dispose of it.
“I said would you like £25,000 not to drive the car? and persuaded him to let me sell it. He wins as he drove it for 2,000 miles, and recouped £25,000 on it, and I also get business too.”
“We are not in a market place where people are brand loyal anymore,” Sutton said. “In this part of the market the brands are wider spread.”

After sales & finance
An aftersales advisor has been appointed who arranges to service cars by sending them to the manufacturer or a specialist. “We don’t always make a profit but its an additional concierge service,” Sutton said.
Full or part-finance penetration is 60-70 per cent for such high cost cars, and Sutton said that asset finance was also popular.
Sutton Bespoke
The company also tailors cars for its rich clientele – special finishes, special exhausts, special wheels and tuning programmes are offered.
He described how the company specked up a Gambala Porsche Turbo – the car was worth £100,000 and the conversion was an additional £200,000 to produce 650hp with specialised bodywork and trimming (and flown to Qatar). The same customer had a Ford GT specked up with a Whittles super charger fitted to give 720hp.
Clive Sutton is now producing its own brand exhausts for Bentley, Aston Martin and Range Rover, as well as grills and tuning packages.
The company has also supplied 12 Grand Cherokees for the Sultan of Brunei, enhancing the four-litre engines.
“The normal rules don’t apply in such a market. It’s a saville row approach to cars. It’s like five-star pimping on millionaires’ rides.”