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Price cuts create a mixed final quarter

Carmakers have had a difficult few weeks as they put together their finance marketing plans for the final quarter.

While cuts to recommended retail prices remained in the wings, it was virtually impossible to set out the finance packages. But something had to be in place from the start of October to carry dealers through until the new year.

The result, as our analysis table shows, is a mixed bag. Some companies are sticking to the cashback route, others are offering 0% finance and some have pulled out of promoted finance altogether until the market settles.

The approach is largely dictated by pricing policy. Citroen and Renault, for instance, favour the cashback route while Fiat has offered price cuts. Fiat is looking at a comprehensive range of 0% finance across its whole model line-up which helps tie the customer to list price, thus reinforcing the value-for-money message.

Volkswagen has pulled out of any promoted finance and is still not offering permanent price reductions. Instead it has rolled its summer sale promotion over till the end of the year, offering cuts on selected models. This can amount to £2,000 on outgoing Passat.

With new Passat due from January it does not take much imagination to see a price 'realignment' with the new model. Certainly it is hard to see them returning to the original price list across the range.

Most significant of all, those companies which have made an early and firm commitment to reduced list prices are now coming back into the market with good, promoted finance.

Ford, having made its price move, has kept marketing spend in finance and has hire purchase (conditional sale) and PCP products available. Unlike previous packages, they are available across most of the range, not just selected old stock models.

This flies in the face of predictions that price cuts would lead to an 'unbundling' of finance and warranty products. When the dust finally settles, F&I is going to be just as important a profit opportunity as ever.

{*FA October 2000*}

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