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.

BBC screengrab
Show Hide image

Owen Smith is naïve if he thinks misogynist abuse in Labour started with Jeremy Corbyn

“We didn’t have this sort of abuse before Jeremy Corbyn became the leader.”

Owen Smith, the MP challenging Jeremy Corbyn in the Labour leadership contest, has told BBC News that the party’s nastier side is a result of its leader.

He said:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.

“It’s now become something that is being talked about on television, on radio, and in newspapers. And Angela is right, it has been effectively licenced within the last nine months.

“We’re the Labour party. We’ve got to be about fairness, and tolerance, and equality. It’s in our DNA. So for us to be reduced to this infighting is awful. Now, I understand why people feel passionately about the future of our party – I feel passionately about that. I feel we’re in danger of splitting and being destroyed.

“But we can’t tolerate it. And it isn’t good enough for Jeremy simply to say he has threats too. Well, I’ve had death threats, I’ve had threats too, but I’m telling him, it’s got to be stamped out. We’ve got to have zero tolerance of this in the Labour party.”

While Smith’s conclusion is correct, his analysis is worryingly wrong.

Whether it is out of incompetence or an unwillingness to see the extent of the situation, Corbyn has done very little to stamp out abuse in his party, which has thus been allowed to escalate. It is fair enough of Smith to criticise him for his failure to stem the flow and punish the perpetrators.

It is also reasonable to condemn Corbyn's inability to stop allies like Chancellor John McDonnell and Unite leader Len McCluskey using violent language (“lynch mob”, “fucking useless”, etc) about their opponents, which feeds into the aggressive atmosphere. Though, as I’ve written before, Labour politicians on all sides have a duty to watch their words.

But it’s when we see how Smith came to the point of urging Corbyn to take more responsibility that we should worry. Smith confidently argues that there wasn’t “this sort of abuse and intolerance, misogyny, antisemitism” in the party before Corbyn was voted in. (I assume when he says “this sort”, he means online, death threats, letters, and abuse at protests. The sort that has been high-profile recently).

This is naïve. Anyone involved in Labour politics – or anything close to it – for longer than Corbyn’s leadership could tell Smith that misogyny and antisemitism have been around for a pretty long time. Perhaps because Smith isn’t the prime target, he hasn’t been paying close enough attention. Sexism wasn’t just invented nine months ago, and we shouldn’t let the belief set in that it did – then it simply becomes a useful tool for Corbyn’s detractors to bash him with, rather than a longstanding, structural problem to solve.

Smith's lament that “it’s now become something that is being talked about” is also jarring. Isnt it a good thing that such abuse is now being called out so publicly, and closely scrutinised by the media?

In my eyes, this is a bit like the argument that Corbyn has lost Labour’s heartlands. No, he hasn’t. They have been slowly slipping away for years – and we all noticed when Labour took a beating in the last general election (way before Corbyn had anything to do with the Labour leadership). As with the abuse, Corbyn hasn’t done much to address this, and his inaction has therefore exacerbated it. But if we tell ourselves that it started with him, then we’re grasping for a very, very simple solution (remove Corbyn = automatic win in the North, and immediate erasure of misogyny and antisemitism) to a problem we have catastrophically failed to analyse.

Anoosh Chakelian is deputy web editor at the New Statesman.