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Target Price: squeeze on margins suppresses small car price discounts

AM has teamed up with What Car? Connect, the data marketing and insight service, to produce a monthly look at used car sales and target price data.

Each month, we’ll feature a Connect report on one sector of the market, prepared exclusively for AM.

And each month, What Car? produces what it calls its 'target price' analysis based on the deals it says buyers can make in the showroom.

The latest in our series of analysis examines the small car segment.

Small car discounts are currently averaging 8.7%, which amounts to £1,218 per car and a level that’s 1.1% below the all-segment average of 9.8%.

This places small cars in the middle of the What Car? Target Price segment table, just ahead of open tops at 8.6% and the 8.2% of coupes.

What Car? editor Jim Holder said: "There’s a huge choice of models in the supermini segment, and although some models are available with discounts as big as 17.5%, this is counterbalanced by the high demand and limited price-cutting offered on models the Audi A1, Mini hatchback and VW Polo, as well as models with restricted supply such as the Mitsubishi Mirage, Honda Jazz and Mazda 2. But of the 32 models in the small car sector almost a third are typically available with double-digit discounts.

Top five average Target Price discounts

Suzuki Splash: 17.5% / £1,775
Suzuki Swift: 16.7% / £2,133
Seat Ibiza:  16.0% / £2,316
Skoda Fabia: 13.8% / £1,801
Hyundai i20: 12.5% / £1,340

"The reduced trading margins imposed by some manufacturers are also suppressing small car discounts to below-average levels, forcing sales people to sell the benefits of the car rather than relying on incentives. Nevertheless, some models still need registration bonuses of up to £2995 to close a deal," said Holder.

Other manufacturer incentives include a 42-month 0% APR PCP with free servicing for three years or 30,000 miles on most Skoda Fabias, a £750 deposit contribution on Fiestas purchased using the Ford Credit finance plan and four years interest-free hire purchase with a £1250 deposit contribution on Renault Clios.

Low-APR finance offers and deposit contributions are commonly available on other small cars too, underlining the highly competitive nature of this sector, which contains several of the nation’s best-selling models.

"We expect to see these offers continue, many manufacturers regarding the small car segment as a vital means of establishing brand loyalty among car buyers."

Visit the Target Price page for more information

> AM new car retail finance offer look-up tool

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