Why your next car could come with a smaller discount

Small car on hillside

Would you pay full price for a new car? Most buyers are prepared to haggle to get a good deal in the car showroom – and for years motorists have enjoyed generous discounts of up to 20% or more.

 

But the days of big discount could be numbered as dealers slash the savings on offer to customers. The average discount at the end of February was 9.4%, compared with 10.3% just six months ago, according to figures from What Car?’s Target Price team. The discounts can make a big difference to cash-strapped customers. Take the new Ford Focus. The recommended price tag is £13,995 for a basic model. If the dealer offers a discount of 10.3%, you could pay £12,554. But if the discount is only 9.4%, the car will cost £12,680, or £126 more.

Size matters

You can secure the biggest discounts if you’re buying an executive, luxury or open-top car. In fact, the savings available on the top-end vehicles have actually gone up month on month by 0.7%. It’s motorists who prefer (or who are restricted to) small cars who are not so lucky. The discounts have dropped from 8.9% to 7.6% on compact models. But buyers of chunky SUVs are similarly squeezed, with savings slumping from 7.9% to 7.1%.

Viva Volvo

If you want to know the UK’s biggest discounter, it’s the Swedish car manufacturer Volvo, offering an average of 14.7% off its models. Renault is also generous, with average discounts of 13.6%. So too is BMW, with an average saving of 13.2%. With discounts in decline, it’s even more important to shop around – including between marques – in search of the biggest savings. But why are savings shrinking?

Driving demand

It’s all down to supply and demand. Well, mainly demand.

The credit crunch put the dampeners on demand for new cars. Many people could hardly afford to pay their gas bill, never mind splash out on a new set of wheels. But consumer confidence is steadily growing, supported by a stronger economy and healthier employment figures. Today’s more confident consumer has fuelled a surge in demand for new cars, culminating in new car sales hitting a 10-year high of more than 2.5 million in 2014. Of course, if we are keen to buy cars, dealers don’t need to lure us into the showroom. Hence the disappearing discounts, particularly for popular cars.

Hard times

Jim Holder, editor of What Car?, says: “We have always encouraged buyers to haggle to get a good deal, but buyers should be aware that it’s going to become much harder to come away with a substantial discount in the coming months. “There are still some sectors, such as executive and luxury cars, where a good deal can be negotiated, but the signs from some of the most popular segments of the market show that manufacturers are starting to stand firmer on their prices.”

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