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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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.