 |
 |
 |
 |
Striking a good deal on a new car requires
the mental toughness of a Mastermind
contestant. That was the conclusion I
arrived at after going undercover to visit 32
dealers posing as a new-car buyer.
Not only must you haggle hard – you’ll miss
on savings of around 10 percent if you don’
t – but you also need to be hyper aware of
the increasingly slick and misleading
methods used to sell you finance.
Haggling is now the easy bit, or at least it is
compared to mastering dealer finance. It’s
also essential: I saved just over £50,000
on 32 cars, or £1566 from an average
£16,225. That works out at almost 10
percent off.
Yes I’m good at it, but after 32 trips across
white tiled floors and nearly 32 cups of
generally lousy dealer coffee, so would you.
What I learnt can be boiled down to some
simple rules: always ask “what’s your best
price?”, never answer when they ask “what
price were you thinking of?” and never
accept the first (or second) discount cut.
The biggest difficulty is overcoming that
natural diffidence the British are blessed
with. The best way is to come armed with a
discount guide – I was investigating What
Car? magazine’s Target Price, which gives
good idea of a figure to aim for.
The real problems come when the
salesman starts to talk finance. Car
companies and dealer groups earn a
substantial amount loaning you the money
to buy your car, and they’re understandably
keen to build on that. For example last
year Ford’s finance arm, Ford Credit, made
a global pre-tax profit of £855 million and
earned more than two-thirds of the car
company’s entire income.
Trouble is, the dealers know many of us
are almost blind when it comes to loan
agreements and interest rate figures. Show
a hint of vagueness at the crucial question
(“So, how are looking to finance this?”) and
I discovered that the salesman – or, worse,
the business manager – will gladly offer
you his white stick.
Their first trick is to avoid quoting the APR
(annual percentage interest rate) on the
loan. This happened at the Audi, VW,
Hyundai, Kia, Mercedes, Mini and Renault
dealers, among others. Instead I was
quoted something called the flat rate,
usually around six or seven percent. But,
unlike the APR, the flat rate doesn’t include
all those fees you always have to pay. The
times I did manage to get the APR rate out
of the salesman (BMW in Farnborough and
Audi in Southampton wouldn’t quote it at
all), it always turned out to be nearly
double. Suddenly a decent seven percent
becomes an uncompetitive 14 percent.
When I pointed out my bank rate was 6.6
percent APR (which I’d been cleared for at
£20,000), a common reply was to rubbish
the APR calculation rate. It’s true this has
caused arguments in the financial world,
but they only really apply to credit cards. A
fixed loan is pretty standard. However, that
didn’t stop the salesman in VW Cardiff from
denouncing APR calculations with all the
force of a hellfire preacher denouncing
Satan. He even produced a plastic-bound
Mirror article on the APR issue to back up
his rant.
The Government will tighten up the rules in
new consumer credit regulations, in force by
June next year, by insisting on a properly
displayed APR figure. Right now however,
the Consumers’ Association points out that
it already has to be written on the final
agreement document, but says this is often
missed by buyers.
But if you’ve haven’t balked at the loan
figure – and some, manufacturer-supported
rates were tempting – the dealer can then
show you the agreeable monthly figure.
This is the most powerful weapon they
possess, because it can be tweaked
infinitely at no loss to them. Just increase
the time period and magically the car
becomes affordable.
No dealer group exploited this more
aggressively than Reg Vardy. Twice I visited
dealers owned by this northern-centred,
multi-marque group (Fiat in Middlesbrough
and Smart in Glasgow) and they were by far
the most unpleasant experiences I had.
The job of the Vardy salesman, once he (or
she in Glasgow) has shown you the car, is
to feed details of your budget into a
computer for the business manager to work
up a monthly figure. This is then accessed
by the salesman who talks you through it.
So far so helpful. But both times I was
shown monthly figures over five years,
despite asking for three. And both included
products I hadn’t asked for, like GAP
insurance and paint protection. To get
these removed from the computer
document required a lengthy tweak back at
the business manager’s desk, so lengthy in
fact that I was at Smart longer than any
other dealer (“That’s nothing,” said the
saleswoman, reassuringly, “someone was
here four hours last week”). The process
made it very difficult to haggle, because
every time you said you want to pay less,
they upped the loan time.
Reg Vardy wasn’t the only dealership to
attach extras to the finance agreement. A
close inspection of the PCP agreement
offered by Renault in Carlisle revealed
credit protection in the loan. Removing that
dropped the three-year monthly payments
on a Clio 1.4 from £217 to £183. That’s a
whopping £1224. When I pointed this out,
salesman defended it by saying he could
be sued if he hadn’t offered it: “We have
to,” he said. “Like McDonalds have to ask if
you want fries with that,” was his straight-
faced comparison.
Often I could haggle down the loan rate.
Taking the HP rate down from a rotten
12.6% APR to 8.9% at Millmead Mitsubishi
in Bath (actually owned by a finance
company), would have saved me £1440
over three years. That was more than the
dealer dropped on the price of the
Outlander I was after.
Only a couple of salesman passed on the
opportunity to sell me finance – the rest
pursued it with vigour. The small Chrysler
dealership in the Lake District near Kendal
even had a video link to a suitably smooth-
talking business manager in Milton Keynes.
Their advantage is momentum – you’ve
bought the car, now you’ve got to pay for it.
Why not go with the attractive looking
dealer quote? Some were straightforward,
even advising me to stick with my bank
rate when they couldn’t beat it. But you can’
t tell in advance who will turn out like that.
It’s terribly boring to say it, but first you
need to do the homework. Just ask any
successful Mastermind contestant.
The full results of the undercover
investigation can be seen in What Car?
magazine, on sale now.
(Don’t need to put this if publishing after
September 10)
BOX
PCP
Ask for a loan at any new-car dealer and
nine times out of 10 you’ll be offered a PCP
– or rather, sold aggressively, if my
experience was anything to go by.
Short for personal contract purchase, this is
now the manufacturers’ favoured way to sell
new cars in this country. Ford was first 10
years ago with Options (most
manufacturers have some daft name for
their PCP, usually echoing Ford’s, eg
Renault Perceptions) and now half its
financed cars are bought on it.
Instead of buying the car outright, you
greatly reduce the monthly figure by just
paying for the car’s drop in value over three
years. After that you either hand it back,
pay the car’s remaining value and own it, or
trade it in. Because the remaining value is
set artificially low, there should be enough
to pay for a deposit on a new car.
The manufacturers love it because
invariably it brings you back to the
dealership. They also make a tidy sum on
the interest, which is nearly always higher
than straight HP because the remaining
value figure is lurking at the end, accruing
interest. An APR figure of between 13-14
percent is common.
Some manufacturers will either lower this or
pay some of your deposit to tempt you in.
However, providing you don’t stray past the
annual mileage limits (very expensive if
you do), the monthly figures are usually
temptation enough.
BOX
APR
Their first trick is to avoid quoting the APR
(annual percentage interest rate) on the
loan. This happened at the Audi, VW,
Hyundai, Kia, Mercedes, Mini and Renault
dealers, among others. Instead I was
quoted something called the flat rate,
usually around six or seven percent. But,
unlike the APR, the flat rate doesn’t include
all those fees you always have to pay. The
times I did manage to get the APR rate out
of the salesman (BMW in Farnborough and
Audi in Southampton wouldn’t quote it at
all), it always turned out to be nearly
double. Suddenly a decent seven percent
becomes an uncompetitive 14 percent.
When I pointed out my bank rate was 6.6
percent APR (which I’d been cleared for at
£20,000), a common reply was to rubbish
the APR calculation rate. It’s true this has
caused arguments in the financial world,
but they only really apply to credit cards. A
fixed loan is pretty standard. However, that
didn’t stop the salesman in VW Cardiff from
denouncing APR calculations with all the
force of a hellfire preacher denouncing
Satan. He even produced a plastic-bound
Mirror article on the APR issue to back up
his rant.