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Post by johnc on Jan 12, 2021 10:47:08 GMT
For a long time now the manufacturers have not been fans of the discounts offered by dealers and the perceived losses they incur having to provide subsidies and other incentives to keep sales numbers up.
The discounts we have enjoyed (I got £30K on mine!) may be coming to an end. I was reading an article recently about VW's new pricing model for the ID electric cars: instead of the dealer buying the car from the manufacturer and then discounting to the end customer if required or relying on their quarterly bonuses, the dealers are going to be paid a commission for selling each car and the price will be set by the manufacturer and will be non negotiable.
A few other manufacturers are now looking at this model and it might be with us, across the board, much more quickly than we expect.
Porsche have always been a manufacturer from whom getting discount was a near impossibility unless perhaps, you were buying a large petrol engined Cayenne. 911's Caymans and Boxsters nearly all sell at manufacturer's list price and Porsche carefully control the used car market with high residuals and lack of supply.
From the manufacturers point of view, you can see some of the attraction: control the supply and the price and maximise profit - a bit like Apple and the i-phone.
I just wonder how these changes will be viewed or accepted by the customer. There is no way I would pay £100K for an M5 or the £87K for the M4 I specced in a lunchtime. I might pay £55K for an A45S or £45K for a Golf R but manufacturers like BMW will need to consider whether they drop their list price or face a massive reduction in sales volume.
If this all pans out, I can foresee a return to the days when seeing a Mercedes, BMW, Porsche or Jaguar was much much rarer than it is today and only those with real money could afford one. Are we nearing the end of the ubiquitous 3 Series, C Class and A4 or will the list prices just fall to reflect the need of manufacturers to produce as many cars?
Used car prices might hold up better than they do just now. However if not all manufacturers adopt the same approach there could be some interesting market reaction. There is also the thought that this might be considered to be anti-competitive and effectively price fixing. Apple have managed to get away with it though so perhaps not.
Food for thought but undoubtedly change of some sort is coming and the customer is unlikely to be on the winning side.
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Post by michael on Jan 12, 2021 10:50:20 GMT
Depends how it's financed, surely? I'm sure a manufacturer might say this cost £X but if the dealer then operated more of a finance broker role then not much might change.
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Post by johnc on Jan 12, 2021 11:03:45 GMT
Depends how it's financed, surely? I'm sure a manufacturer might say this cost £X but if the dealer then operated more of a finance broker role then not much might change. Only to a certain extent. If you are just looking at monthly payments the things that matter are cost price, interest rate and GFV. If there is currently £5,000 discount off the cost then the only way you are going to get the same monthly payment is if the GFV is significantly higher or the interest rate significantly lower and someone is going to have to fund that. It would appear that the manufacturers don't want it to be them. Many manufacturers currently have interest rates down at 2% to 4% which is insufficiently high to allow the higher list price to be funded by a reduction in interest so it either needs a higher residual or higher monthly payments. |
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Post by Deleted on Jan 12, 2021 11:07:07 GMT
I thought price fixing was illegal.
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Post by Martin on Jan 12, 2021 11:21:10 GMT
It does make a lot of sense to be more transparent, but it means those of us who do the research and/or put the effort into getting a good deal will end up paying more as there won't be others who pay more than they need to balancing things out. List prices would have to come down overall though, as so many are a nonsense and way above what most people would be prepared to pay...which is why they are discounted so heavily.
There isn't much you can't get at least some money off, even the more in demand cars e.g. the broker I used for the Golf is offering 3% / £2k+ off a Boxster GTS 4.0 (5% off the others). Most seem to be 'deposit contributions', but it's easy to get around that, £1,500 of rate c£5k discount we got off the Golf was dependant on taking out a PCP so that's what we did and paid it off within 14 days with no penalty.
Leasing is a whole other matter and I've never been able to make leasing the best financial option, but there were some amazing deals on the Golf R a couple of years ago (if you wanted a basic spec) which is causing people a real issue when they look at leasing a new MK8 and they realise it's going to cost twice as much! The best example I've seen was a 4 year deal with metallic and DSG, which cost less than £12k in total including RFL. A new one would be £22k on the same terms.
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Post by ChrisM on Jan 12, 2021 11:36:45 GMT
With the current economic turmoil world-wide caused by covid, I don't think that now is a sensible time for manufacturers to act on "price fixing"; some manufacturers may be absolutely desperate for sales in a few months time. You may end up with higher list prices but "cashback" offers. Anyway if we're all going to have to buy electric vehicles soon, and autonomous driving is on the cards too, many people may simply end up buying the cheapest as there will be no "fun" left in driving any more :-(
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Post by Big Blue on Jan 12, 2021 11:42:36 GMT
Maybe VW can make that work in the short term with a new model ID3 but when a factory is churning out thousands of Golfs a week the manufacturer will soon get tired of storing them when they can’t be shifted by using price incentives via either the dealer or manufacturer cashback. Factories don’t flex. that quickly regardless of the JIT procurement model: a smelting plant is burning and needs to be used; raw material commitment needs to be made well in advance and sales need to made to cover the cost.
Unless the mass-market manufacturers are going to reduce output to a level where this model works (like specialist brands do, as per the Porsche example - which only works because a lot of components are taken from the mass-market parent!) they’re pissing up a rope. Factor in the very powerful works-council unions in Germany who won’t agree to production drops just to increase profitability for the board and shareholders and they’re pissing up a rope three storeys up.
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Post by Bob Sacamano v2.0 on Jan 12, 2021 11:48:07 GMT
BMW, Mercedes, Audi etc have chased big volumes to give them economies of scale. If their prices "increase" substantially then volumes will be lower, over capacity in manufacturing will become an even bigger problem, plants will have to close, economies of scale disappear, margins reduce again, prices have to go up further, sales drop, they are forced into mergers etc etc. It's a death spiral.
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Post by Grampa on Jan 12, 2021 11:53:29 GMT
I've never managed to get a discount on any cars I've bought (aside from the Megane 225 which was £1000 off) - one of the hazards of buying a car either at the launch event or a short time after which is what mine have been. But most of my new cars have been on contract hire so I assume the contract hire company got a good discount but I would never get to see what it was.
I can't see me buying a new car again - they're just too expensive for nothing very special now - so I won't be troubled!
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Post by PetrolEd on Jan 12, 2021 11:59:45 GMT
I guess it is odd that you lose all control of the vehicle at the point of sale. The current sales model is hated by manufacturer, retailer and punter alike.
However its been the manufacturer alone that has chased volume and thats what has promoted heavy discounting. The fight to be the number 1 seller between Merc, Audi and BMW has meant that the discounting on offer would make a Ford dealer blush.
Its obvious that manufacturers need to move from volume to profitability but their on the hamster wheel and need to keep the machine turning. Asking punters to put up with higher prices in this economy is a sure fire way to turn sales to zero.
As far as finance is concerned, PCPs are due to be the new PPI, there will be a hell of a lot of bad press due to a few idiots not understanding the type of agreement they've entered into and manufacturers having to set up funds for any comeback. I see the model turning more to personal leasing deals that the manufacturer has more control over and maybe not having the regulation a normal PCP deal has.
However we cut it, many buyers are used to going to Audi, Merc, VW and BMW and getting into a new car every few years for £300-400 a month and to sell cars you have to keep to these numbers.
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Post by racingteatray on Jan 12, 2021 12:15:00 GMT
Interesting. I am not close enough to this to know the answer but to me retaining the ability to offer clients even a symbolic discount feels like good customer care. I discount my services all the time because clients expect it - if I stood firm and said "no", there's a real risk they will give the work to someone else. The art is to price in a way that allows for discounting whilst remaining profitable, without pricing yourself above market expectations. Not easy.
As regards new cars, I've only every had three (out of the 21 cars I've owned) and I am in no rush to have another. The first one, the 135i coupe, was because I was free and single, and had the money, and just wanted for the first time in my life to have the experience of going in and ordering a new car to exactly the specification I wanted. I got a handsome discount as it was late 2008 and I was literally the only customer in Sytner's Canary Wharf showroom.
I then went back to second hand cars until needing to pool all available cash to pay for the purchase and renovation of our house. That's why I flogged the Z1 and the M5 and switched to a brand new M135i on PCP (again well discounted even though it hadn't even launched in the UK when I ordered mine in July 2012). That worked well so I did it again for the 440i which was 20% discounted with a very low APR.
But now I own the 440i and am not minded to go back to PCP. I'd rather stick to what I can afford on a cash basis and buy second-hand as I always used to.
The only exception might be if we decide to replace my wife's 500 with an electric 500, which would make sense on a PCP I expect. But that decision would only be taken as and when life returns to normal - no point in spraffing monthlies on something that's barely being used.
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Post by Tim on Jan 12, 2021 12:21:07 GMT
I received an email from Drive The Deal this morning.
Best discounts are generally on VW Group products apart from the usual 20+ % on Merc C Class.
The VW ID3 has 19% in the list, first time I've seen that car on there.
14.5% off new model Golf R as well
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Post by Martin on Jan 12, 2021 12:49:01 GMT
I received an email from Drive The Deal this morning. Best discounts are generally on VW Group products apart from the usual 20+ % on Merc C Class. The VW ID3 has 19% in the list, first time I've seen that car on there. 14.5% off new model Golf R as well It didn't take long at all for the new R to get to 13-15% discount, but with a list price of a fraction under £40k before you add any options, it needs that level of discount. Keeping the spec down to exactly what we have now would give a list price of £45k / discounted £38.5k (£4k more than we paid) but as we'd be blowing the £40k list price then might as well go with Martin Spec which increases the list price to £52,875, so £45,200. Which feels like a lot of money for a Golf, even a very good one so I'd be looking at an A45S Plus as well, but add metallic and voodoo cruise to one of those and (after discount) it would be £57k which is silly for a small hatchback. |
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Post by chipbutty on Jan 12, 2021 13:59:46 GMT
£3100 deposit and £346 a month (incl VAT) for a 24 month, 12k per annum lease on a Mk8 Golf R DSG (Britannia car leasing).
Drops to £2900 and £324 if you stick to 8k per annum.
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Post by Martin on Jan 12, 2021 14:26:15 GMT
£3100 deposit and £346 a month (incl VAT) for a 24 month, 12k per annum lease on a Mk8 Golf R DSG (Britannia car leasing). Drops to £2900 and £324 if you stick to 8k per annum. That's a lot cheaper than a PCP if you want one for 2 years, although a 4 year PCP would be £460 a month. But as per my post earlier, at £11,400 for 2 years / £475 a month that's about double what you could get one for a couple of years ago. Keeping it fairly sensible and 'only' adding in £5k worth of options and it must be around £650?. Using the residual value on their finance calculator (which does look a bit pessimistic) I think it would be £600 a month in total for my spec over 48 months / 15k miles a year (cash purchase) and it would be £730 a month on a VW PCP. |
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Post by PG on Jan 12, 2021 15:29:58 GMT
I guess it is odd that you lose all control of the vehicle at the point of sale. The current sales model is hated by manufacturer, retailer and punter alike. I agree. It has always seemed perverse that the manufacturer and buyer have to be kept apart by a third party dealer who in many cases has different motives to the other parties. There are so many ways this current model does not work. Many people's views on their cars are easily negatively influenced by a bad dealer experience rather than by an inherently bad car. If, under warranty, I'm unhappy as a buyer I have to negotiate via an intermediary rather than direct to the people who built the car. It's impossible to tell what discounts are manufacturer support, which are dealer support and which are just money off. The whole systems is opaque and secretive. Those car companies that decided to do it differently from the off - Tesla I think? - must surely end up with a better relationship with their customers as it is a 2 way rather than 3 way transaction. They can also have better control of the residual values and reselling of second had cars. That way they can set the price and then, if they want, offer "support" to get sales and have control. In the B-2-B software industry, many software authors started out using distributors to sell their product. But many then realised that they were spending way too much time arguing with and managing their distributor channel as trying grow their sales. I worked for the European distributor of a US software author when I first came up to the Midlands, who was later bought out by the software author, so I saw both asides. Customers were way happier under the direct model - you're unhappy, want to talk price, want to feel loved, then deal with the organ grinder and not the monkey. |
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Post by johnc on Jan 12, 2021 15:45:46 GMT
I think it would be £600 a month in total for my spec over 48 months / 15k miles a year (cash purchase) and it would be £730 a month on a VW PCP. £730 a month for a Golf is a joke |
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Post by racingteatray on Jan 12, 2021 16:55:21 GMT
£730 per month is a lot for a car full stop.
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Post by Martin on Jan 12, 2021 17:38:21 GMT
£730 per month is a lot for a car full stop. Not really.....I'd happily buy Lindsay a new 911 if I could get one for £730 a month and I would think (know) it was a bargain! But it is way too much for a Golf. The PCP on my 535d was £730 a month and I had to increase the deposit to £6,500 to get it back down to that figure when I added the voodoo lights on at the last minute. |
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Post by johnc on Jan 12, 2021 17:40:12 GMT
£730 per month is a lot for a car full stop. More than an M5 costs! |
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Post by Martin on Jan 12, 2021 17:44:21 GMT
£730 per month is a lot for a car full stop. More than an M5 costs! All in without any dodgy man maths or any other financial wizardry? I could get a 18-24 month old one with a price of c£55k down to that, but not a new one even with a huge discount. |
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Post by Martin on Jan 12, 2021 17:57:29 GMT
I had to look....need this sort of distraction after a particularly tough day......
- The cheapest in stock LCI M5 Competition I can find is £82,325, which isn't a bad deal, it's better than the brokers
- In the BMW finance example, after 4 year and (only) 32k miles it will be worth £37,447 (not unreasonable)
- So ignoring the interest, that's £44,878 in depreciation or £935 a month
- If you don't ignore the interest rate of 2.9% APR then the total cost is £1,082 a month
- Increase the mileage to 15k a year and it will be more expensive (£1150?)
Then you'd need to add at least £4k of options (ideally £9k) which is another £70 a month (or £150)
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Post by johnc on Jan 12, 2021 18:33:38 GMT
All in without any dodgy man maths or any other financial wizardry? I could get a 18-24 month old one with a price of c£55k down to that, but not a new one even with a huge discount. I did put down a sizeable deposit! Mine was a few £'s over £70K new and on the road with BMW finance at 3.9% over 4 years. It has the upgraded leather and leather dash, Premium pack, Comfort pack, Sports exhaust and the MDrivers pack. |
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Post by Martin on Jan 12, 2021 18:38:14 GMT
All in without any dodgy man maths or any other financial wizardry? I could get a 18-24 month old one with a price of c£55k down to that, but not a new one even with a huge discount. I did put down a sizeable deposit! Mine was a few £'s over £70K new and on the road with BMW finance at 3.9% over 4 years. So, classic man maths.....ignoring the deposit when thinking about the monthly cost!  |
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Post by johnc on Jan 12, 2021 18:40:45 GMT
I did put down a sizeable deposit! Mine was a few £'s over £70K new and on the road with BMW finance at 3.9% over 4 years. So, classic man maths.....ignoring the deposit when thinking about the monthly cost! But against the new car now, I am £12K ahead of the game which is £250/mth excl interest. |
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Post by racingteatray on Jan 12, 2021 18:49:18 GMT
At the risk of sounding like Chris, I clearly don't earn enough (or drive enough)!
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Post by Martin on Jan 12, 2021 19:05:01 GMT
At the risk of sounding like Chris, I clearly don't earn enough (or drive enough)! I’m sure that’s not true, you just live in the wrong place. When you live in and around London, it’s the housing equivalent of spending Supercar money to buy a Golf! It’s all about priorities and the value you give different things. |
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Post by johnc on Jan 12, 2021 19:12:30 GMT
I probably won't do it again but I had an endowment mature and my old car was still reasonably valuable so I thought why not. There aren't many times in life where you get a chance to get something you have always wanted so I decided to take it when the opportunity presented itself. I don't see myself ever being in the position that might lead me to buy a property in Italy although my wife did joke last night that she could qualify for an Italian passport so maybe.......
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Post by Martin on Jan 12, 2021 19:15:43 GMT
I probably won't do it again but I had an endowment mature and my old car was still reasonably valuable so I thought why not. There aren't many times in life where you get a chance to get something you have always wanted so I decided to take it when the opportunity presented itself. I don't see myself ever being in the position that might lead me to buy a property in Italy although my wife did joke last night that she could qualify for an Italian passport so maybe....... That’s my point about the value you put on things and you’re right to treat yourself. Anyway, a 2 week family holiday to Florida can easily cost more than 12 months of M5 payments, so it’s actually very good value as the family get the benefit of the car for a whole year! |
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Post by chipbutty on Jan 12, 2021 20:35:52 GMT
£872 a month for a new 911 (10k per annum, 36 months with £11.5k deposit). I assume once you are ready to talk turkey pencils may be sharpened somewhat.  |
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