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Carmakers try to work out how to pay for cuts

Motor manufacturers are still hedging their bets when its comes to promoted finance packages. The number of genuinely low rate deals in the market is limited while the carmakers try to work out how to pay for recent price cuts.

The most popular package remains 0% hire purchase based on list price. This looks attractive to the customer and allows dealers to make full margin on the car. Most schemes also ask for a hefty deposit (typically 40% to 50%) up front so are suitable for good quality cash-rich (or good value part-exchange) buyers.

Fiat and Renault are heavy players in this market and it seems to work. Both companies have seen substantial gains in market share through October. Daewoo is also pushing 0%, though customers are staying away for other reasons.

Renault was still finalising its December programme as this supplement went to press but is going to add more 0%, even on popular models such as Scenic. It will also bring back low rate finance on selected models.

Ford, which has managed to cut prices and still keep some promoted rates in the market, is trying to attract retail customers with 9.9% APR on all Fiesta, Focus and old model Mondeos. It is also keeping its PCP rates below the average at 10.9% to 11.9%.

But continuing worries about future guaranteed values means many companies are still wary of subsidising PCP finance too heavily. For the most part a rate of 13% to 14% balanced by cautious final payments is now becoming the norm.

Analysts believe this is a sensible approach in the current market. It allows customers reasonable monthly payments and gives some flexibility at the end of the contract. For instance, a Peugeot 206 Look 1.4 at just over £200 a month with only £500 deposit is an affordable proposition for many customers.

It will take a few more months before the market settles down and the effects of the new pricing structure can be fully costed in. Some carmakers are still offering time-limited cashbacks and price cuts but it is hard to see how they will be able to restore the old price lists in the current climate.

Market planners are already looking ahead to February and March. Don't be surprised if finance offers make a comeback by then. They have worked in the past and they will certainly work again.

HIGH STREET LENDERS (36-MONTH LOANS)
Loan Amount Lender APR Monthly Repayment
with PPP
Monthly Repayment
Without PPP
£2,000* Abbey National 15.9% £78.27 £69.18
Barclays 17.9% £82.70 £70.98
Halifax 19.4% £84.16 £72.10
HSBC 16.9% £80.20 £70.04
£5,000 Abbey National 11.9% £184.81 £164.40
Barclays 15.9% £201.07 £173.26
Halifax 15.5% £199.18 £172.18
HSBC 13.9 £192.30 £168.68
£10,000 Abbey National 9.9% £358.81 £320.22
Barclays 13.9% £390.71 £337.99
Halifax 12.9% £383.56 £333.23
HSBC 10.9% £368.32 £324.52
£15,000 Abbey National 9.9% £538.23 £480.34
Barclays 11.9% £568.97 £494.14
Halifax 12.9% £575.34 £499.85
HSBC 9.9% £544.70 £480.33
Source: Automotive Management**

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