AM Online

Caution creeps in ahead of X-plate

There is a short term approach to subsidised finance deals at the moment. The reasons are two-fold.

First, carmakers have been waiting to see the detail of Stephen Byers's response to the Competition Commission inquiry before deciding on future pricing policy. There is clearly a need to reduce prices, certainly at the transaction level and preferably at list as well, without damaging future residual values.

Second, the industry already has its eye on the September X-plate change and needs to get the right marketing campaigns in place to carry through the crucial July to September quarter. That is not easy to do in the present commercial climate - hence the caution.

So, of the major carmakers, only Honda has a campaign which is running through to September and there will be wholesale changes at the end of June when most of the current campaigns end.

For the moment, carmakers are happy to be advertising price cuts, cunningly disguised as “dealer prices” or cashbacks. The approach has been taken by Ford, Renault and Seat, for instance, while Volkswagen has been more honest and opted for the good old-fashioned 'Summer Sale'.

There are finance deals available with all these dealer-price sales but, naturally enough, they are not as competitive as those on full margin cars. More common are packages which can easily be priced in, such as free insurance or free servicing.

Rover, which had such a huge success with its promoted finance in April and May, switched tactics under its new owners to go for a 10% price reduction in June. This lacks the vital element of reassuring the customer with a guaranteed future value and it remains to be seen how effective it will be.

In the present market, with residual values falling rapidly, most carmakers are still steering clear of low-rate PCP packages where they are committed to future prices.

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