Is a price shift on the way?

  19 September 2016

Auto Retail Network’s Where next for the PCP? event this week raised a host of sub-topics in the finance arena. There was commentary about the rise of the PCH alongside the PCP, regulatory scrutiny and how exchange rates could impact on the attractiveness of the PCP. And it’s this point that merits closer attention.

To my mind the new car buyers are currently being tempted into retailers by very attractive finance deals. Indeed this is a point highlighted by many industry experts and commentators. These, usually PCP, finance deals are attractive because the manufacturer puts some sort of support in place. Often this support is simply a deposit contribution, other times it’s an ultra-low or zero-rate interest rate. It could be a straightforward discount or it could be a combination of these things.

The reason these ‘never been a better time to buy a car’ deals have been available in the UK recently is that the UK has, largely because of the exchange rate, been a very profitable place for the OEMs to push cars compared to other parts of Europe. As a result, car makers could afford to provide these offers.

Now the exchange rate is nearer the level we saw a few years ago, the question that has to be asked is; how long can these levels of support last? 

Of course NSCs will have hedged to mitigate currency fluctuations, but this is only a delaying tactic and will probably last about six months or maybe a year. At that point, will the offers dry up? And if so, will sales leads do the same? 

Sources I’ve heard from say that some manufacturers are just waiting for someone to blink first on these offers.

However, my personal view is that while it seems inevitable car prices will rise next year, it won’t be a bump. Instead it will be a soft landing simply because of the sausage-machine nature of car manufacturing, which dictates that all those cars coming out of the factory must eventually find owners and OEMs will do their best to help – possibly by diverting funds from other parts of their businesses.

While the deals continue, its up to retailers to make sure their businesses are robust enough to cope with the pricing shift.

Tristan Young

Editorial Director

Auto Retail Network

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