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Post-War British Motor Trade Association covenant


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#1 Leigh Trevail

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Posted 04 June 2012 - 07:26

The post war steel shortage combined with the governments policy of 'Export or Die' caused a shortage of new cars in the late 1940s & early 50s. Only those with a genuine reason for needing a new car (such as a doctor) were permitted to purchase one; and then they had to sign an agreement drawn up by the British Motor Trade Association not to sell it on. This was to put an end to a lucrative black market in new cars. Could anyone tell me when the covenant was first introduced, when it was increased from 6 months to a year and when the covenant was abolished.

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#2 AAGR

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Posted 04 June 2012 - 10:01

If you have access either to THE AUTOCAR or THE MOTOR for the immediate post-war period, you will find that 'the covenant' is well-covered, and well-indexed.

If I had time to help you, I would but ....

For sure, the covenant scheme was gradually phased out in the early 1950s, so that in the end only mass market cars were still restricted by this - and it was all over (IIRC) by about 1951/1952.

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#3 AAGR

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Posted 07 June 2012 - 21:41

I had time to do a bit more digging. The Covenant was introduced in July 1946, when the purchaser was obliged to keep a new car for at least six months. That period was stretched to one year in 1948, and later to two years.

Relaxation began to take place in 1952, with no fewer than 19 listed marques being freed from this restriction, and from September more than half of all British cars listed had been freed from the Covenant. More marques were freed before the end of the year, the situation then being that only the fastest-selling products of Britain's 'Big Five' (BMC, Ford, Vauxhall, Rootes and Standard) were still affected, and the compulsory period of ownership was then slashed to just one year.

The scheme was finally abandoned early in 1953.

#4 Leigh Trevail

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Posted 08 June 2012 - 06:51

Thank you for taking the time with this. I always thought that it covered all cars whilst in existence; but obviously not.

#5 John Elmgreen

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Posted 11 June 2012 - 12:22

I imagine this is a subject of interest to very few, but I am one of those very few! I would like to know more and to be directed to any sources. I will see what I can find from AAGR's recommended Motor and Autosport sources.
This was a subject of interest to me when writing recently with Terry McGrath our book "The Jaguar XK120 in the Southern Hemisphere" because we wanted to try to put the smaller Jaguar export markets into some home (British) perspective. In doing this, I dealt briefly with the covenants, and also with the dreaded Purchase Tax - each being factors in the histories of cars that were "home delivered" from 1950 on.
You may guess that we are now working on the equivalent book for XK140s where the subjects are not quite so directly relevant (the 140s starting in 1954) but still of interest to me.
This is an extract from the 120 book:
"In 1949 and 1950, the purchase of an XK120 in the UK was nearly impossible. In fact, new vehicles of any kind were almost unobtainable for some years after the end of the War. In those circumstances, there was the potential for the development of a lucrative black market for vehicles at prices far in excess of usual list prices. In order to control price exploitation and hinder queue jumping, such cars that did filter through to the home market were required to be the subject of a formal legal covenant by the buyer not to sell the vehicle for a set period, or, if a sale were required, stipulating that it be sold back to the dealer at the original list price, less an allowance for depreciation. This scheme was Government approved but run by the British Motor Trade Association, in whose favour such covenants were given. The BMTA had as members every motor manufacturer, every accredited motor dealer, and all importers (as well as many other industry participants). The scheme was commenced in August 1946 with a 6 month resale restriction, increased to 12 months in 1947 and to 2 years in 1950.
Of course, the temptation of a quick profit was irresistible to some, and the scheme covenants were breached. In several cases, the BMTA took the culprits to court to enforce the covenants and succeeded in each case we have seen, despite the offending sellers and dealers protesting that they were unenforceable restraints of trade, and, further, that no damage had been suffered by breach of the covenants (as the vehicles could not be legitimately resold for more than list price anyway). But the courts held that the covenants were valid, and that damages for breach were in effect equivalent to the profit made on a black market resale.
One such court case, decided in July 1951, concerned an XK120 registered LHX844 (not identified). It was bought on 2 January 1951 by James William Shenstone Gilbert of The White House, The Drive, Rickmansworth, Hertfordshire and of 140 Park Lane, London W1 for its list price of ₤1,263/3/11, subject to the then usual 2 year covenant. However, within about 4 weeks of purchase he had re-sold it possibly for about ₤2,200. The court found that even if the car were retained for the covenant period, it might then be worth some ₤2,500. Damages were awarded to the BMTA of the difference between the purchase price and the ‘black market’ value accepted by the court at ₤2,100. One imagines that in fact growing availability of the XK120 on the home market in later years would have meant that such a premium would not later have been achieved for a secondhand car.
The unmet demand may have provided an incentive for overseas buyers who turned up at the factory gates to take delivery of new XK120s for export after a short period of home and perhaps continental use, to find a way to ‘redirect’ them. However, the BMTA at least sought to discourage such behaviour so far as overseas buyers who entered into covenants were concerned, such covenants being to the effect that the car was to be exported: one case reported in Australia showed the BMTA, having obtained a judgement in England, presumably for breach of a covenant, chasing the defaulter all the way back to Australia. No doubt publicity and deterrence were the motives.
As Jaguar’s mission at the time was to export, many cars were bought through overseas distributors as "home delivery" cars, where the overseas distributor ordered the car for a named customer who was to collect it at the factory. These cars were usually road registered in Coventry by the factory and delivered directly to the buyer at the works. The cars had a variety of fates. Some were used for a short period in the UK and possibly Europe – up to say 6 or 12 months - and then shipped to the buyer’s country – the intended course. Some were shipped out and brought back to the UK at a later date (perhaps those bought by expatriate Englishmen later returning home) or taken to the USA if they had been originally bought by a US serviceman. But it is also clear that a number of cars sold on a home delivery export basis never in fact left the UK at all. Presumably the owners made their peace with the UK revenue authorities in relation to Purchase Tax and also sought release from the BMTA covenant, and were then permitted to keep the cars in the UK. This seems most commonly to have happened with cars ordered from Africa – there do not appear to have been examples of this for cars ordered from Australia or New Zealand. As they were ordered from overseas and it may not always be clear what they did very early in their lives, we have included their known histories here even if it appears that they never actually left the UK."


#6 Leigh Trevail

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Posted 11 June 2012 - 19:20


“I imagine this is a subject of interest to very few”

All of the threads that I start are of interest to very few, in fact this one has been one of the most popular. Thank you for your contribution.

#7 tsrwright

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Posted 12 June 2012 - 13:39

What was the position with racing cars eg Coopers?

#8 David McKinney

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Posted 12 June 2012 - 14:24

Good question, Terry

I know they were subject to Purchase Tax (often avoided!) but perhaps the covenant applied only to members of the BMTA, which probably excluded the likes of Cooper

#9 Catalina Park

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Posted 13 June 2012 - 07:10

Didn't NZ have some sort of restriction on the sale of new cars and also the resale of new cars?
I have been reading Wheels magazines from the late 50s and they give it a bit of a mention.

#10 David McKinney

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Posted 13 June 2012 - 08:07

Yes it did

There were long waiting-lists for locally-assembled new cars (around three years' wait in the '50s) and if you wanted to import a built-up car you had to use "overseas funds", in other words use your US bank account or have a rich uncle in the UK. I was involved on the periphery, and know there were ways around it...

In this period a two-year-old car would cost you more than a brand new one (but at least you could buy it)

Waiting-lists for some local cars were still about a year in the mid '60s, as I recall, but I don't remember when the overseas funds requirement was abolished

The whole thing was opened up in the mid '80s, resulting in a flood of Japanese imports and the bottom falling out of the secondhand car market

#11 Lee Nicolle

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Posted 13 June 2012 - 09:09

Yes it did

There were long waiting-lists for locally-assembled new cars (around three years' wait in the '50s) and if you wanted to import a built-up car you had to use "overseas funds", in other words use your US bank account or have a rich uncle in the UK. I was involved on the periphery, and know there were ways around it...

In this period a two-year-old car would cost you more than a brand new one (but at least you could buy it)

Waiting-lists for some local cars were still about a year in the mid '60s, as I recall, but I don't remember when the overseas funds requirement was abolished

The whole thing was opened up in the mid '80s, resulting in a flood of Japanese imports and the bottom falling out of the secondhand car market

A mate of mine who likes a lot of 50s and 60s Pommy cars was really pissed off with this. All the homegrown and British imports all ended up as scrap metal as everybody bought jap imports. They then became scrap quickly too it seems as the parts to repair them were hard/impossible to get.

These days I feel the manufacturers are doing that anyway.A not so extreme case. Last week a customer wanted a headlight for a 2002 Ford Exploder. not advailable aftermarket[which I sell primarily] nor genuine either. They were until recently @ around $1250 ea.And surprise surprise they did not sell many. So the story is go to the wreckers!! Where most vehicles are damaged in the front. Mind you there is not that many Exploders left anyway and now a broken headlight will write them off!!
There is numerous cases of this.Falcon AU3 window switches, not advailable genuine or aftermarket.
And every manufacturer is doing the same.