Car salesmen - worse than bankers?

Perhaps not.

Bankers take solace; public opinion may have turned against you in the last few years, but you will forever be held in higher regard than car dealers.

That is according to Daily Mail’s online title thisismoney.co.uk, which recently published a story warning consumers not to be taken in by “pricey” forecourt car finance at a time when high street lenders were offering personal loans at rates as low as 6 per cent.

The Mail’s warning was prompted by the announcement by the Finance and Leasing Association (FLA) that some 66 per cent of new cars purchased in March - a peak month for motor retail - were bought via dealer finance, a fairly astonishing leap from 54.2 per cent last March.

The article quoted Andrew Hagger of comparison site Moneynet, warning consumers not to get “carried away” by the patter of “smooth-talking car salesmen” and sign up for finance without shopping around for cheaper deals.

But is the rise in dealer finance seen over the last two years due to a sudden influx of brutally persuasive forecourt finance salespeople, or indeed a sudden deterioration in the average UK consumer’s desire to seek out cheaper deals?

Nope. It’s the car manufacturers themselves, and the fact that, in many cases, they are undercutting the banks on price.

The UK new car market, a vital arena for global carmakers, has been having a hard time for a few years now, and is still desperately trying to push back into the two million-units-plus annual sales total enjoyed before the recession.

Manufacturers, engaged in a prolonged battle to keep the metal moving through dealerships and into suburban driveways, have seized any opportunity to incentivise purchases. The scrappage scheme was a temporary panacea, but with that gone, finance has become the weapon of choice.

Low- and even zero-percent interest deals have proliferated in the last two years, and have not only been a large part of the reason for any growth in the UK new car market, but for the ballooning penetration rate of finance into motor retail.

The deals are provided by the vast captive finance houses – essentially pet banks - of the carmakers, and since these are fed directly from the manufacturer balance sheet, any revenue lost in low interest rates is more than mitigated by the revenue contribution of sales made possible through the offering of cheap finance. The captives are, essentially, colossal and extremely well-accounted marketing departments.

If anything, the gradual softening of personal loan rates offered by the high street – a trend which has corresponded chronologically with the rise of dealer finance – could be seen in part as an attempt by banks to compete with the boom in manufacturer offers.

But even taking the auto industry’s mass marketing campaign out of the equation and looking at the deals offered by non-captive finance houses (nearly all of which, incidentally, are bank subsidiaries anyway), are consumers really being offered a raw deal in comparison to personal loan rates?

It seems highly unlikely. After all, the penetration of finance into used car sales – a section of the market largely ignored by the captives since it offers little benefit to manufacturers – has also risen since the onset of hard times for the consumer pocket.

Being blunt, this is because car finance offers many people a way to fund a car when they are not able to get affordable credit elsewhere. The reason for this is fairly simple. Motor finance providers secure their lending against the car purchased, which gives them an alternative way to mitigate credit risk besides hiking up APR on a deal.

This does leave customers at risk of vehicle repossession if payments are not maintained. However, with the current regulatory climate leaning heavily on those companies which take a louche approach to affordability in their lending, not to mention the costs involved in repossession, it’s not as if lenders are funding vehicles with a view to seeing them again within a year.

In fact, default rates in the motor finance sector have been sitting at a historic low in the years of relatively cautious lending since the recession, despite the weakness of the UK household wallet.

So far in this discussion, we’ve taken the high street lenders on their word with regard to advertised rates. But there is, you may be unsurprised to hear, a fairly heft salt cellar to be pinched from when considering these claims. I’ll be looking to get stuck into that next time.

It may indeed be a good time for car dealers looking to entice people into signing up for finance, but to be fair to this much-maligned sector of the retail industry, they may actually be telling the truth when they tell potential buyers they’re doing them a favour.

Fred Crawley edits Leasing Life and Motor Finance at VRL Financial News.

Car salesmen: as bad as all that? 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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This is no time for a coup against a successful Labour leader

Don't blame Jeremy Corbyn for the Labour Party's crisis.

"The people who are sovereign in our party are the members," said John McDonnell this morning. As the coup against Jeremy Corbyn gains pace, the Shadow Chancellor has been talking a lot of sense. "It is time for people to come together to work in the interest of the country," he told Peston on Sunday, while emphasising that people will quickly lose trust in politics altogether if this internal squabbling continues. 

The Tory party is in complete disarray. Just days ago, the first Tory leader in 23 years to win a majority for his party was forced to resign from Government after just over a year in charge. We have some form of caretaker Government. Those who led the Brexit campaign now have no idea what to do. 

It is disappointing that a handful of Labour parliamentarians have decided to join in with the disintegration of British politics.

The Labour Party had the opportunity to keep its head while all about it lost theirs. It could have positioned itself as a credible alternative to a broken Government and a Tory party in chaos. Instead we have been left with a pathetic attempt to overturn the democratic will of the membership. 

But this has been coming for some time. In my opinion it has very little to do with the ramifications of the referendum result. Jeremy Corbyn was asked to do two things throughout the campaign: first, get Labour voters to side with Remain, and second, get young people to do the same.

Nearly seven in ten Labour supporters backed Remain. Young voters supported Remain by a 4:1 margin. This is about much more than an allegedly half-hearted referendum performance.

The Parliamentary Labour Party has failed to come to terms with Jeremy Corbyn’s emphatic victory. In September of last year he was elected with 59.5 per cent of the vote, some 170,000 ahead of his closest rival. It is a fact worth repeating. If another Labour leadership election were to be called I would expect Jeremy Corbyn to win by a similar margin.

In the recent local elections Jeremy managed to increase Labour’s share of the national vote on the 2015 general election. They said he would lose every by-election. He has won them emphatically. Time and time again Jeremy has exceeded expectation while also having to deal with an embittered wing within his own party.

This is no time for a leadership coup. I am dumbfounded by the attempt to remove Jeremy. The only thing that will come out of this attempted coup is another leadership election that Jeremy will win. Those opposed to him will then find themselves back at square one. Such moves only hurt Labour’s electoral chances. Labour could be offering an ambitious plan to the country concerning our current relationship with Europe, if opponents of Jeremy Corbyn hadn't decided to drop a nuke on the party.

This is a crisis Jeremy should take no responsibility for. The "bitterites" will try and they will fail. Corbyn may face a crisis of confidence. But it's the handful of rebel Labour MPs that have forced the party into a crisis of existence.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.