A fight to the death in the world of car dealership

Personal loans vs dealer finance.

In a previous post, I expressed bafflement at an article warning car buyers to be wary of expensive finance arranged on the forecourt, at a time when all sorts of wonderfully inexpensive personal loan rates were apparently on offer from high street lenders.

I was baffled because half the “pricey” dealer finance providers the article was warning consumers about are owned by the same banks as the personal loans providers in any case, and because the other half are bankrolled by car manufacturers offering hugely subsidised interest rates that no sane bank would compete with.

I went on at some length about all this (I’m from the trade press… we don’t get out much), but the upshot was that, looking at the way the car finance business works, the assertion that customers should beware of forecourt finance is dubious at best. 

Of course, there’s a lot more to consider than just price when weighing up the pros and cons of two completely different financial products, but let’s face it - it’s price that matters when it comes to consumer judgement. So let’s settle this with numbers.

On the personal loan side of things, Bank of England data shows that the typical cost of a £5,000 loan has steadily risen every month for the last five years, from an average rate of 8.7 per cent in March 2007 to 15.8 per cent in April 2012.

Now, this figure is a mean of all lowest advertised rates in a given month, and does very little to reflect the actual average interest rate of personal loans underwritten in a given month.

And to be fair to the loan providers, there has been a hard core of aggressive players, supermarket players M&S, Sainsbury’s and Tesco among them, pushing in the opposite direction over the same period. In May, we tracked no less than seven lenders duking it out between 6.0 per cent and 6.3 per cent (for a theoretical loan of £8,500 over 4 years). But overall, this action has been drowned out in the Bank of England stats by the mass of more cautious lenders in the UK.

Now let’s look at what’s happening in the world of forecourt finance. As I have already alluded to, more than 50 per cent of all finance deals offered each month are subsidised by manufacturers, dropping them way beyond the competitive reach of the loan providers. Include deals where discounts or freebies are offered in terms of maintenance, service and the like, and you’re looking at 80 percent of all new car finance.

As for the remainder, a quick phone round all the big providers (who are, you will remember, major banks) confirmed that their average APR on deals actually offered to consumers currently varies between 8 per cent and 10 per cent.

OK, sure. This doesn’t look too hot compared to those 6 per cent deals from the high street. But let’s not forget that those figures are “representative” APRs: since the actual rate offered by a lender tends to vary hugely depending on a customer’s credit rating, they can only legally advertise a rate achievable by at least 51 per cent of applicants. Put it another way, and 49 per cent of borrowers end up paying a higher rate.

So: half of applicants to the most competitive loan providers are probably getting a cheaper deal than between 20 per cent and 50 per cent of new car finance applicants, to the tune of 2-4 per cent in interest rate terms. I’ll admit that there’s a certain amount of beermat mathematics involved in working this out, but the conclusion is clear: there’s not much in it.   

In all of this (and I promise I’ll talk about something different now), we’ve just been talking about the new car finance market, and customers with good enough credit ratings to be considered by the manufacturer captives and supermarket loan providers in the first place.

Next time, I’ll look at the hundreds of thousands of people who’ve been completely unable to find a way to finance a car purchase since 2008, and what on earth the industry is planning to do with them. Now that’s a struggle.

Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.