It’s a buyers’ market, but only if you do it right…
The car market in Ireland, as we know so well by now, is pretty much on its knees. Consistently low sales of new cars since the financial crisis first bit hard in 2009 have put many dealers out of business, have seen layoffs at the corporate level in the importers and have seen a dearth of new metal on our roads. So, you’ll doubtless be thinking, this is the time to strike. It won’t have escaped your notice that there are apartments in Monaghan selling for the same price as a new car, in some instances, so what goes for houses must go double for cars, right?
No. At least, not quite. The tricky thing about buying a new car is the margin that the car dealer is making on the sale. Generally in Ireland, a dealer’s margin on a new car is around 8%, not including any extra money that they can make in terms of sales bonuses from the car maker, accessories and our old friend, delivery and related charges. 8% isn’t really a lot, and doesn’t give the car seller a lot of wiggle room if you come marching into the showroom, assuming that it’s like the January sales and you’re going to get half off. You won’t. Indeed, that 8% margin is only a notional one. According to CNN, in 2007 the average margin the the motor industry was just 1.1%, although that was in fairness a time of heavy discounting for the car trade in America.
Mind you, it’s a time of heavy discounting right here, right now, and that’s what makes it confusing for value hungry motorists. Many of the deals that you will see advertised are pretty much as good as they can be made, indeed value-based brand Dacia advertises that it’s prices are no-quibble; or in other words, you’re not going to get a better deal for cash, buddy. We’ve become used over the years to being told to bargain hard, but with margins in the industry slashed to try and encourage customers over the threshold, that’s just not necessarily the best way any more.
“What’s happened in the past couple of years is that people have seen dealers falling, and dealers having problems so the advice from some of the consumer journalists or consumer focused agencies has been haggle, haggle” says Johnathan Meade of Nissan and Hyundai main dealers Hutton & Meade. “This, in some cases, has been taken up as ‘offer half what you’ve been asked.’ There isn’t that kind of margins in our industry. We do offer good deals, we do offer good value but there’s only so far we can go, we’ve got to stay in business.
“In most cases people have already done a lot of shopping. You can see the website traffic and website traffic is a huge indicator of what shoppers are looking for, both new and used , so we know people are arming themselves with information, with finance information but the honest answer is when you sit down in front of a salesman, you get a feel for a deal, you get a feel for whether it’s right or it’s wrong. And ultimately that’s why people will do a deal, because they feel it’s the right one for them.”
Of course, that narrow margin issue doesn’t hold true for all, and least of all for the big premium brands, so the irony is that those who are buying expensive German cars probably have the best opportunity for a bit of haggling.
Down at the more mainstream level, there are better ways of getting a good deal. One of the best is to keep an eye on the car magazines and motoring supplements and see what new metal is coming up soon. If there’s a new, for argument’s sake, Ford Focus due to arrive soon, then there will doubtless be temping deals available on the outgoing one, as both dealers and car maker will want to run down their stocks. Buying a dealer demo car has always been a canny option too, as most will have had minimal mileage and yet will be effectively a ‘newsd’ car, with a chunk of early depreciation off the price. Keep your eyes open too for car companies having ‘open weekends’ or promotions. You might not get an awful lot more off the price, but you many car makers are now offering enticements like a free fuel card with up to €500 worth of juice on it. That’s enough for as much as 6 month’s motoring in a reasonably efficient car.
And then there’s your trade in. If you’ve bought a car since 2009 and fancy trading it in this year, you’re on a bit of a winner. The lack of new cars sold in that period has meant a dearth of good used cars in the system, so prices have hardened, partially cancelling out new car price rises from the Vehicle Registration Tax changes in the Budget. “One of the big things in the industry at the moment is the shortage of used stock” says Johnathan Meade. “So they can get very good deals, because there was a change in the VRT structure in the budget, so when new car prices rise, used car prices rise too and the scarcity of used cars increased the values on top of that. So the cost of change has been factored in, we focused on that, and that cost hasn’t altered all that much, so there are good deals. But as with everything, it’s all about shopping around.”
It’s always good to make sure your trade-in is in good nick too. If it’s due a service, get it done and a valet is a major bonus. By coincidence, I recently traded my ancient 2003 clunker in and the €180 I spent on getting it thoroughly valeted made a huge difference. Suddenly, my old beater was looking nearly new.
It’s probably most important of all to shop around for your finance though. Most of us still get our new cars with either a loan, lease or HP agreement, and while the banks are hardly flashing the cash around, you can still get yourself a better deal than you might have thought.
“Are they shopping around enough?” asked personal finance expert Jill Kerby when I spoke to her. “I should think they probably are, and that’s because this isn’t the old days any more when you could just go into your bank or your credit union and just set down exactly what you wanted to borrow, what kind of car you wanted to buy and you walked out with your loan. Times have certainly changed since then and the banks, on all fronts, are being much more particular who they lend to, how much they lend and especially your capacity to repay that loan.”
But beware of being tempted in the showroom. Many car makers are now offering in-house finance from their own banking arms, and it can just be too tempting, sitting there surrounded by the shiny metal you want to buy, to sign on the line there and then. There could be a better deal out there, so resist the temptation and get your finance sorted first. Jill Kerby agrees: “There’s nothing better than to go into the car showroom, see the car that you actually want and to have the salesman say “Have you go finance yet? No? Oh, well come on in here and we’ll sort you out.” And it just sounds like a reasonable deal because you have an idea in your own mind of how much you can afford and if the salesman’s approach is in those parameters you’re very tempted to sign on the dotted line, and you really shouldn’t because it’s worth comparing a couple of things. One of which is just basic personal term rates for financing. Now this is different from a car leasing or financing arrangement that you’ll get from a dealer or in some cases the banks. Now, I’m not going to say that it’s always cheaper to go to your bank for a personal loan, but what does happen if you do that is that you might have a bit more flexibility in terms of how you pay it off and how long for. Some people I have come across don’t even understand the difference between, say, a hire purchase agreement and a car leasing arrangement.”
So, getting a good deal on your new (or used for that matter) car is not about huffing your way up to the salesman’s desk and naming your terms, I’m afraid. The reality is far less dramatic. It’s about taking the time to shop around, getting to know the rhythms of the car industry and its product cycles, building a careful understanding of your finance package and what it really entails and, finally, deciding on a strict budget and finding the car you want at the price you can afford. Do all that and the deal will be right.