The level of support being offered by manufacturers to tempt customers into buying a new car has been described as worrying in a new report.
New car pricing has been largely static throughout 2012, but manufacturers have increased support through customer savings, have supported interest charges to reduce APR’s, have increased the amount of 0% APR offers, and support for warranty and servicing is increasing.
In research included in the AM UK 2013 Franchised Dealer Report from newcarpromotions.co.uk two main threats to new car sales in 2013 are identified:
1. Extending the average period of finance contracts and offering extended warranties means customers may keep their cars longer and renew less often. This places further pressure on manufacturers to make new car buying more affordable and look for other customer channels e.g. traditional used car buyers.
2. With pressure from over-production and a lack of demand in southern European markets, UK manufacturers have benefited from strong supply and financial support to ‘move the metal’. With some manufacturers stating they will reduce production (Volkswagen by 150,000 next year) to sit more in line with demand, can this level of support continue?
Nick Phillips, newcarpromotions.co.uk director, said: "If customers are used to these sorts of offers, will they buy with less support and if cars become more expensive? These are questions which will be answered as we proceed through 2013."
Contract lengths are creeping up, he said, in order to achieve decreasing payment offers for PCPs. "The average is now 38 months which is far in excess of manufacturers desire to change customers into a new car after 24 months."
And as manufacturers prefer to promote PCP to support their desire to change a customer into a new car sooner, HP monthly payments are increasing, as are the deposits required.
"In the past 12 months the average monthly HP payment has increased by £39 to £286.
This is exactly the same as the PCP monthly payment although the deposit required is £3,204 higher than on PCP and has increased by 19% in the past 12 months.
Of greater concern is the average term which is now 42 months on 0% HP versus the 38 months on PCP," said Phillips.
Additional insight in the AM 2013 UK Franchised Dealer Report looks at new car pricing fluctuations in 2012, cash offers/customer savings inc 0% VAT adn 0% APR, and PCP and HP promotion levels.
More information on the AM 2013 UK Franchised Dealer Report is available at www.am-online.com/ami/