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Deals set to play key role in new car sales

Finance deals are expected to play an important role in sales of new cars this year. The credit squeeze is making loans more expensive and many potential buyers are likely to have nagging concerns about entering loan agreements.

There were reports of heavy discounting by retailers in the final days before Christmas, and New Year sales were widely promoted. The projected dip in home prices this year is expected to depress demand for new cars.

Many manufacturers are likely to rely on traditional favourites: three- or four-year 0% finance.

But some carmakers believe they need to use a more subtle approach as private buyers become increasingly aware of whole-life costs.

Some retail buyers know that cut-price new cars tend to have poor residual values. A better idea is to wrap up the discount in a way that associates buyers with something appealing.

Citroën will continue with its ‘Go lo CO2’ programme, launched in October after it was voted GreenFleet magazine car manufacturer of the year for a second time.

A Citroën UK spokesman said: “We are continuing with cashbacks, free loans and free insurance on some models but also have other schemes.”

Citroën’s green scheme gives customers who part-exchange their car for a model with a lower emission figure a cashback of up to £1,000.

Manufacturers realise finance offers are needed from the start of 2008. Nissan has HP and PCP programmes on the Qashqai – its most successful new model for years ­– and also on its the new X-Trail.

Louise Wallis, head of business development at the NFDA, expects car finance to be “hugely important” over the next 12 months.

“There are likely to be many 0% finance offers,” she says. “Dealers welcome the way these attract buyers into showrooms but in some cases it can lead to them having to make a financial contribution because the manufacturer is making no money.

“The credit squeeze could help dealers because Tesco and other direct lenders will find it more difficult to find money to lend. Their borrowing rates are likely to continue to rise.”

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