AM Online

Policy over prices divides carmakers

The latest round of price cuts has opened up a clear gap between the carmakers who have taken a permanent stand on lower prices and those who are still making short term, tactical offers.

The genuine price cutters, mainly at the prestige end of the market, have left themselves little or no margin for funding finance rates.

Whether by accident or design, pressure from the Government has caused the 'unbundling' of finance and other promotional extras which was predicted six months ago.

Customers are more likely to pay the 'sticker' price and take finance based around a typical rate of 11%-13%. Dealers can fall back on a more stable, more traditional forms of income rather than relying on undercover manufacturer trading bonuses.

Carmakers taking this route include Jaguar, Audi, Mercedes and BMW – all of which have cut prices and withdrawn additional trading money. None of them has any finance offers running at present.

In the volume market, the picture is completely different. Rather than cut prices, carmakers are relying on a combination of cashbacks and low rate finance to bring customers back into the showrooms. But many of these offers are on selected models only which, dealers say, is adding to the uncertainty and confusion.

Ford is typical, with up-to £1,500 available on Focus 1.6, but only model year 2000 cars. There is up-to £3,000 back on selected Cougars and low rate finance on the slow selling Racing Puma. Significantly, Ford cashbacks are only available against list prices.

Many other volume carmakers, including Renault, Honda and Fiat are offering 0% finance over extended terms, up-to 36 months. There is little enthusiasm for low rate PCP schemes because of the continued risk of setting residual values too high. Those PCPs which are in the market have typical interest rates around 14%.

Many dealers expect the volume carmakers to bite the bullet and finally cut list prices at the end of September when the present marketing campaigns run out.

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