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Huge Costs & New Cars 2007-02-28

Posted by clype in Money, Statistics.
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With new 07 car registration plates just around the bend, the next few weeks could see over 800 million GBP wasted as people drive their new cars off the forecourt.

Buying a new car online

Opting to purchase a new vehicle via a high street dealer could mean paying well over the odds for a new set of wheels. Instead, buying online could save motorists thousands of pounds on their dream car. For example, moneysupermarket.com looked at the most searched-for cars on its website and found a saving of 3 728.00 GBP can be made on the list price of a Vauxhall Astra Design, with this car retailing at 15 935.00 GBP on the forecourt, compared to 12 207.00 GBP at moneysupermarket.com.

Mr.Richard Mason, director at price comparison website moneysupermarket.com, said:

‘Our research reveals only three per cent of people have bought a new car online and therefore a massive 97 per cent are missing out on the savings to be made.

‘Whilst people are willing to buy expensive goods such as flat screen TVs online, often having identified what they want in the showroom, they are more reluctant to buy a car in the same way.

‘Instead, drivers prefer to deal face to face and test drive before they commit to purchasing.

‘However, the chance to knock nearly a quarter off the list price just by buying your new car online should make far more motorists sit up and take notice of this opportunity.’

Financing your new purchase

Once the decision has been made on what car is going to be purchased, it is important to consider the best means of financing it. Research from moneysupermarket.com shows that driving off with forecourt finance rather than a low-rate loan when buying a new 07 car could collectively cost UK motorists up to 3 500 million GBP.

Data released today shows new car buyers could save more than 1 400.00 GBP each on average over three years by shunning showroom finance and opting for a low-rate personal loan. A driver buying a new Ford Mondeo costing 14 575.49 (16 195 GBP minus ten per cent deposit) via the Ford finance deal at 12.5 per cent APR would repay a total of 19 003.49 GBP over three years. However, buying the car with an Alliance & Leicester personal loan at 5.9 per cent APR means the buyer will only repay a total of £17 530.79 GBP — a saving of 1 472.70 GBP.

Richard Mason continued:

‘Our figures show consumers should be wary of showroom finance deals.

‘Taking out a low-rate personal loan instead means they can avoid paying over the odds. After spending time getting the best price on their new car purchase, people ought to find the most cost-effective way of paying for it.’

Ensuring you have the best value motor cover

moneysupermarket.com also urges drivers to review their motor insurance when buying a new vehicle, especially those who bought a new car last February with a year’s free insurance. Mr.Mason said:

‘Receiving a year’s free cover is a great perk when buying a new car, but one year on you could find yourself paying a hugely inflated premium, as the policy the car dealer arranges for you is unlikely to be very competitive.

‘Many insurers will operate at a loss over the first year of a policy, and then look to rack up the profit on expensive renewals. By shopping around, you can take advantage of the new customer discounts, ensuring you get the best deal for your insurance. If you have not made a claim in the past twelve months, you should normally expect to be paying less than you did the previous year.’

Thousands of motorists will pick up a new car with the first of the 07 number plates tomorrow — and its value will plummet by up to 7 000.00 GBP  as soon as they drive it off the forecourt.

In some cases, a car will be worth 44 per cent less than it had been just minutes earlier if the owner wanted to sell it again — and, surprisingly, many do.

The day of the number plate change is one of the biggest of the year for new car sales to private buyers. But a consumer test with 20 of the biggest-selling models in the UK discovered a massive gap between the price paid on the forecourt and the value only a few miles later.

The motoring magazine ‘Auto Express’ rang dealers in three parts of the country for each of the 20 models, claiming to be an owner who had made a terrible mistake.

The ‘owners’ said they had bought the car less than a week earlier and had only driven a few miles in it, but due to a ‘change in circumstance’ needed to sell it again and wanted to see what they could get for it.

The results shocked the researchers. The biggest price gap — 6 985.00 GBP — was on a BMW ‘3 series’, which costs just under 25 000.00 GBP new but which dealers would buy back for only 18 000.00 GBP.

The biggest proportional loss was on a Ford ‘Ka’, whose slump in value from 7 395.00 GBP to only 4 167.00 GBP in a matter of days represented a 44 per cent drop.

The car which held its value the most, in percentage terms, was the 10 750.00 GBP Honda ‘Jazz’, which fell in value by 15 per cent to 9 100.00 GBP after a few days — still a 1 650.00 GBP loss for an owner.

Researchers based their figures on the original list price of the car and an average of the three quotes from dealers to buy it back when it was a week old with 50 miles on the clock.

In the course of their investigations, the researchers discovered many of the 60 franchised dealers they rang had experienced dozens of similar cases themselves.

They ranged from a man who bought his wife a manual car for her birthday and then discovering her licence covered her to drive only automatics, to people whose businesses had collapsed the following day.

Sometimes the purchase had been an impulse buy and the owners later realised they had made a terrible mistake.

The depreciation problem is partly caused by the fact that dealers are so desperate to hit new-car sales targets that they bring in more models than they need and pre-register them to make the figures.

Mr.Jeff Patterson, of the car-price ‘bible’ Glass’s Guide, said:

‘The simple fact is manufacturers produce more units than they can ever sell.

‘These cars have to go somewhere when they leave the factory gates, and the only option is to pre-register some of them.

‘Technically, they are no longer new, but the fact they only have delivery miles on the clock and are very cheap pushes down the value of every other used car.’

Car dealers are supposed to declare all pre-registrations so the public can see how true sales figures are, but it is believed the industry has found legal loopholes to get round declaring these. Mr.Patterson said:

‘These vehicles only have to be reported if they are sold on within three months. One way the industry gets round disclosing the true amount of vehicles that are pre-registered is to just hold on to them until this period has expired.’

Mr.Mat Watson, the features editor of ‘Auto Express’, said:

‘Hundreds of thousands of people will be visiting their car dealer tomorrow to buy a brand new 07-plated vehicle, unaware of the huge sums of money they will lose the moment they drive it off the forecourt.

‘On some models, like the Ford “Ka”, these can be mind bogglingly high.

‘But even those which have only just been released, such as the new Vauxhall “Corsa”, also devalue by a surprisingly large amount.’

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