Up to a fifth of new cars in the UK are not sold direct to consumers, or used as fleet, but are instead pre-registered to dealers, a BBC investigation has found.
The cars are then sold second-hand to the public at bargain prices.
Some experts say high levels of pre-registrations indicate new car sales are not as robust as they appear and some dealers are feeling the pressure.
A survey for the BBC has found around half of buyers are confused by pre-reg.
Motor suppliers trade body, the Society of Motor Manufacturers & Traders (SMMT), admits demand for brand new cars is beginning to “stabilise”.
Pre-registration is legal but unofficial, so it is often referred to in the motor trade as the “secret of the car industry”, a You and Yours investigation has found.
The cars are surplus stock, sold cheaply by suppliers to dealers, who then register them under their own business name.
After being kept off the road for 90 days the cars can then be sold to consumers, typically at discounts of 20% and more.
Trade bodies and government agencies do not collect an official record of the number of cars pre-registered by dealers, which are often classified in SMMT figures as ‘fleet.’
The SMMT’s fleet category is up 5.4% so far in 2016 compared to private new car registrations, which have stalled.
The SMMT collects figures for pre-registrations made by manufacturers, in accordance with the Supply of New Cars Order 2000, which regulates the industry.
However this is only around 2,000 cars per year.
Motor industry analysts Cap HPI conducts a regular survey of 200 UK car dealers.
Philip Nothard from Cap was surprised by the results of his most recent poll.
“It was a bigger result than we were expecting and bigger than we’ve seen before.
“40% of dealers expected September’s pre-registration figures to be between 11- 20% of the total new car market and more than a fifth expected volumes to exceed 21%.
“That would equate to almost 100,000 pre-registered cars in one month.”
Nigel McMinn, managing director at dealer group Lookers supports Cap’s findings.
“About 10-15% of the UK new car market is self registration – speculatively-built cars which need to find a home.”
Chairman and managing director of Ford of Britain, Andy Barratt, told the BBC “pre-registrations are inevitable.”
Experts have told the BBC that in the long term, the falling value of the pound could lead car manufacturers to ship fewer surplus cars to the UK.
James Baggott, editor of Car Dealer magazine has a different interpretation of the current figures.
“We’re constantly talking about how buoyant the car market is.
“But pre-registered cars are inflating the real car market: they’re 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 Tamzen Isacsson from the SMMT insists the UK market is “buoyant.”
“Self registration is a normal part of a functioning car market.
“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.”
Buying a pre-registered car can be a bargain, but there are also pitfalls.
Research for the BBC suggests many consumers are unaware of the potential hazards.
A poll of 1,000 readers by Auto Trader found that 44% of car buyers did not know what “pre-registered” meant.
About 55% 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.”
Car dealers say pre-registrations can help them achieve monthly targets.
Scott Kershaw works for a large Manchester dealership and has a positive view.
“If you hit a certain number of cars and register a certain number of cars it can be very beneficial,” he says.
Others say pre-registrations can pile on the pressure.
A dealer who asked to remain anonymous told the BBC he was too dependent on pre-registered cars.
“We’re making margins of just 1%.
“You need to do it to get the bonuses but the more pre-reg you have the harder it is to shift new cars.
“It’s a vicious circle and can create cash flow problems.”
James Baggott, editor of Car Dealer magazine says pre-registration can get out of control.
“I refer to it as a drug but only because that’s how a lot of dealers refer to it themselves.
“One you are hooked into in, it is very hard to get off it.”
Louise Wallis from the National Franchised Dealers Association says her members generally deal with pre-reg well but are never fully in control.
“It’s always going to be difficult when you’ve got a strong supplier with a not so strong, more disparate retail sales network.”
But Ms Isacsson of the SMMT rejects the charge: “Let’s be clear. This is driven by natural business demand and consumer choice.
“Self-registrations enable dealers to manage their stock.”
‘Pre-reg’ cars now widespread in UK – BBC News