The Best Car Finance Blog In The World

As car manufacturers continue to beat a path to the Chancellor’s door I ask myself what they are going to ask for? We already know that cars in the UK are overpriced so why not cut prices in order to stimulate sales. On the other hand, as Lord Mendelson has suggested, it is the funding that needs to be looked at in order to make it possible and affordable for the public and small businesses to drive new cars and keep the production lines flowing. This has been understood in America with the announcement that General Motors’ leasing arm, GMAC, is about to re-enter the market and provide dealers with badly needed facilities to enable them to sell more cars. In America the lease model is different to the UK. Over there you go to a main dealer and negotiate the on the road price. Once you have agreed a figure you then consider the finance options with leasing being one of them. As the finance is linked to the manufacturer the rate is often subsidised by the manufacturer to encourage leasing or it can be subsidised by the leasing company in order to retain the substantial business generated by the manufacturer’s dealers. In the UK manufacturers force the dealers to retail cars at a much higher price allowing them only 15% maximum between the price the dealer pays for the car and the retail price (unless they have a retail promotion going on). However, through the leasing companies, who provide any make or model, extra bonuses are provided on selected models that the manufacturer wants to promote which feeds its way through to some very low leasing rates. Why is it done this way in the UK? Well by not providing these extra bonuses to the public via dealer prices they protect the premium prices charged on the forecourt for used cars. I have as an example in my book ‘An Insider Guide To Car Finance’ a Nissan Almera that had a retail price of £10,250. You could have negotiated with the supplying dealer and got the price down to around £9,000. A used 6 month old car on average mileage would be on the main dealer’s forecourt for around £7,995 and you would have maybe paid £7,500. However, unknown to the public, the car was being sold as brand new, delivered to the customer for £5,750. Imagine what this would have done to the used car stock if the public, as they are in the US, were offered new cars at this price by the dealer? It’s called protectionism and is actively practiced in the UK. This is why leasing is one of the most misunderstood and underrated finance product when it comes to car finance in the UK. The main problem is that many funders are now running low on funds and are therefore setting the underwriting bar very high so many more applicants are being declined. If the government wants to help the UK car industry they should be talking to the leasing companies not the manufacturers unless they would like to simply see more cars being stock piled in fields. For those that like to read statistics at its height US sales of new cars reached 17 million cars but last year dropped to 13.2 million from 16.2 million in 2007. This year sales are predicted to drop further to 10.5 to 12.5 million units. In the UK sales were around 2.2 million but are expected to drop to 1.5 million to 1.7 million this year. The real problem is the general lack of understanding when it comes to vehicle finance which I am about to redress with my new book which describes well over 40 ways to finance a car. The book will be available soon so watch this space. By Graham Hill