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Car manufacturers forced to offer financial incentives on nearly new cars to compete with PCP offers

Rupert Pontin

Manufacturers are being forced to introduce deposit contributions on some nearly new cars in order to create differentiation with the monthly rates now available on subsidised brand new vehicles.

Glass's, the motor industry data market leader, said that the move had been made after some manufacturer dealer councils complained that it was difficult for them to make used car PCPs price competitive.

Rupert Pontin (pictured), Glass's head of valuations, said: "Franchise dealers were finding themselves in a position where the monthly PCP rate on a 12-month old car was only a few pounds less than a new one.

“This made the used stock tricky to move using this crucial finance method.

"This situation has arisen for a number of reasons.

“One is that manufacturers remain very keen to keep plants working at near capacity, so they are offering more and more attractive finance deals on new vehicles.

“In 2016, new car PCP rates are probably lower than ever.

"Another is that there are so many pre-registered vehicles now in the market, perhaps at a level twice that of roughly 12 months ago.

“This means there are large numbers of nearly-new cars on forecourts and dealers have to find ways to sell them. PCPs are an obvious route but they need to be price competitive.

"Finance will be more crucial than ever in this year's new and used car markets, we believe, so creating a sensible and sustainable pricing structure for PCPs across vehicles of different ages is crucial."

Pontin said that the large amount of pre-registration activity that was taking place inevitably created distortions across the used car sector.

He said: "When this many nearly-new cars are around, their values inevitably come under pressure and there is a domino effect on two, three and even four-year-old vehicles.

"Certainly, the level of pre-registrations that we are now seeing from some manufacturers is having an effect on their values across the market but it is difficult to see the situation changing in the short-medium term.

“You cannot simply change the flow of vehicles being manufactured that quickly."



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