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Carmakers prefer cautious approach

With manufacturers largely rolling their promotion programmes over for another two months while they decide their pricing strategies, this month's finance analysis table has a familiar look.

The manufacturers were caught between the late announcement of the Government legislation on pricing and the need to get some programmes in place before the August and September rush.

There was little option but to push ahead with the status quo, at least until the end of the quarter.

The result is a cautious approach, taking account of uncertainty over what pricing policy the market will stand, and what effect it will have on residual values.

The manufacturer finance houses remain wary of moving into schemes such as low rate PCPs, for instance, for fear of being caught with too many customers in negative equity.

Traditional hire purchase and 0% finance will be the flavour of the next couple of months. Some carmakers have opted out of promoted rates altogether and are headlining their ongoing finance with APRs around the 13%-14% mark.

Finance experts believe this leaves the industry vulnerable to a marketing push by the direct lenders who will undoubtedly want to attract extra business with some competitive headline rates.

More and more carmakers are using marketing money for 'cashbacks' rather than cutting list prices. Ford has moved heavily into this market with a huge range of cashback deals on its main retail models, Ka and Fiesta.

Vauxhall is also playing with words, such as 'Value Pricing'.

No major volume manufacturer wants to be the first to jump on cutting list prices. Putting money on the table in this way disguises the full effect and helps maintain some semblance of stability.

Many dealers believe Rover has set the benchmark with its early move to 10% off and they expect transaction prices to settle at this lower level. But they say customers are not yet convinced prices have bottomed out and remain suspicious of special offers and short-term action.

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