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American-style car leasing crosses the Atlantic

UK motorists will be able to own cars for as little as £99 a month under an American-style car leasing scheme, reportedly pioneered by the Reg Vardy dealer group.

A report in today’s Daily Telegraph said the scheme will enable drivers to own top-of-the-range models for a fraction of the price currently available on existing deals in Britain.

The cheapest car will be a Vauxhall Corsa, costing £99 a month, plus VAT. Under the plan, the dealer will pay the car's £105-a-year road tax, while any servicing should fall under the manufacturer's warranty, the newspaper said.

The scheme is being launched because of new EU legislation which gives car dealers the opportunity to sell a wider range of cars at lower prices for the first time - until now, car manufacturers had a stranglehold over the prices charged.

As well as transforming the lease market in Britain, experts reportedly said the move could trigger a car price war on all vehicles sold.

The only catch to leasing is that motorists may have to comply with mileage limits so that new cars are not driven excessive distances, the newspaper noted.

The leasing scheme is hugely popular in the United States, where it accounts for nearly 60% of cars on the road - for an ‘all-in’ monthly cost of £216, Americans can drive away one a new 4x4 while lease terms in the US normally run for two to three years, at the end of which the vehicle is returned to the car company or bought by the customer.

But British motorists will have to check the small print carefully on any leasehold agreements, the newspaper warned - in the US, the price demanded to buy the car at the end of the lease may be far more than the car is worth on the open market.

The first of the US-style leasehold schemes to be launched in Britain will be operated by the country's second biggest car dealer, Reg Vardy. It is expected to offer a full range of cars, although exact pricings are still being negotiated with the manufacturers.

Family saloons, such as the Renault Laguna or Nissan Primera, will cost between £150 and £200 a month, while a Mercedes C-Class or BMW 3-Series will cost £250 to £300 a month.

Prof Garel Rhys, the director of automotive research at Cardiff University, told the Daily Telegraph: "This is a harbinger of the future. This is the start of things that people hope dealers will try to do."

Power was shifting from carmakers to dealers, who are now allowed to sell a wider range under the new European Union legislation, he reportedly said, adding: "This is another way to sell nationwide. Other big dealers have not been able to do that. It shows that the dealers can act independently. It is a way to tie people to a Vardy dealership."

Prof Rhys said Vardy's plans could be a boost to new car sales, which slipped 0.5% in June and 2.8% in May - "There are suggestions that the market is going off the boil. More initiatives like this could rekindle the flame."

Robert Forrester, Reg Vardy's finance director, reportedly said customers would be able to order their new car over the internet and the dealer would then deliver the vehicle to the customer's door.

He also reportedly said that the plans meant that Vardy would be able to sell to customers in the M25 region (the London metropolitan area; about the size of greater Los Angeles), even though the company's 93 dealerships are based in the Midlands, north of England and Scotland.

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