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Limit zero rate deals, analyst warns market

The UK's used car sector is in danger as US-style cut-price finance deals start to creep into the market. Full-blown zero per cent deals, so popular in the US, are arriving in the UK with Volkswagen offering deals on new Passats.

Volume manufacturers are also considering offering radical deals to keep the new car market buoyant after three years of record growth.

But Peter Cooke, professor of automotive industries management at Nottingham Trent University Business School, says there is no need for such deals in a vibrant market and is urging the industry to be aware of the severe knock-on implications for the used car market.

“If manufacturers offer free finance over a long enough period the traditional used car buyer will be enticed further up the chain to purchase a new car, abandoning the used market,” he says. “If zero rate financing is still available in a few years' time, they will simply replace the car with another cheap finance new car. If it is unavailable, they are most likely tied into retaining the original car until it is fully paid for.”

Cooke is urging manufacturers to support special deals for new car finance with parallel schemes for used cars. He also wants them to limit the number of units to which a particular deal applies or offer it for a strictly limited period only.

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