Up to a fifth of new cars in the UK are estimated to be “pre-registered” to dealers – potentially skewing sales figures and leaving drivers confused.
These cars are surplus stock sold cheaply to dealers who keep them before selling on to customers at discounts.
Some dealers say pre-registering is “like a drug” used only to hit their sales targets, a BBC investigation has found.
The industry says the system allows dealers to manage stock efficiently.
Pre-registration is legal but unofficial, so it is often referred to in the motor trade as the “secret of the car industry”, an investigation by BBC Radio 4’s You and Yours has found.
The cars are sold cheaply by suppliers to dealers, who then register them under their own business name.
In effect this means they become the first owners of the cars.
After being kept off the road for 90 days, the cars can then be sold to consumers, typically at discounts of 20% and more.
A key reason there are so many pre-registered cars is that they are often the only way dealers can achieve monthly sales targets set by manufacturers, You and Yours has found.
If dealers miss targets they risk losing monthly bonuses from the manufacturers.
James Baggott, editor of Car Dealer magazine, said that for many, pre-registration was out of control.
“I refer to it as a drug but only because that’s how a lot of dealers refer to it themselves,” he said.
“Once you are hooked into it, it is very hard to get off it.”
One car dealer, who asked to remain anonymous, told the BBC he had become dependent on pre-registering cars as he had such narrow profit margins.
“You need to do it to get the bonuses but the more pre-reg you have the harder it is to shift new cars,” he said.
“It’s a vicious circle and can create cash flow problems.”
But Tamzen Isacsson, of the Society of Motor Manufacturers & Traders (SMMT), which represents the industry, said: “Let’s be clear. This is driven by natural business demand and consumer choice.
“Self-registrations enable dealers to manage their stock.”
Buying a pre-registered car can be cheaper for drivers, but many do not understand the system and there are also pitfalls – not least that some buyer protection has evaporated.
Some 44% of car buyers did not know what “pre-registered” meant, according to a survey for the BBC by Auto Trader of 1,000 of its readers.
About 55% incorrectly thought the warranty on a pre-registered car would be either the same or longer than for a conventional new vehicle.
“It could be that a pre-registered car has been sat on a retailer’s forecourt for six months so that would mean six months of the manufacturers’ warranty would have expired,” said Jon Quirk, editor-in-chief at Auto Trader.
“Your car won’t technically be new because your name won’t be the first in the logbook.
“And if you’re buying on a leasing deal, you may find that the very best offers are only available on brand new cars.”
In response, Ms Isacsson, of the SMMT, said: “It enables consumers who don’t want to wait months for a new car to be able to access one immediately and with a very low mileage.”
There is also concern that the pre-registration market could skew new car sales figures, as they are not actually on the road.
Motor industry analysts Cap HPI said its research suggested the numbers were growing, and could total as many as 100,000 cars in one month.
In a survey of 200 dealers, 80 predicted that pre-registered vehicles in September would account for 11% to 20% of the new car market. A further 52 expected them to account for 21% or more of the market.
For example, Nigel McMinn, managing director at dealer group Lookers, said: “About 10% to 15% of the UK new car market is self registration – speculatively-built cars which need to find a home.”
Trade bodies and government agencies do not collect an official record of the number of cars pre-registered by dealers.
Instead, the SMMT records the sales as “fleet” vehicles bought by a business.
James Baggott, editor of Car Dealer magazine, said: “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.”
But Ms Isacsson, of the SMMT, said: “Self-registration is a normal part of a functioning car market.”
Listen to the full story on BBC Radio 4’s You and Yours at 12:15 BST on Friday
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‘Pre-reg’ cars now widespread in UK – BBC News