UK motorists will be able to own cars for as little as £99 a month under a revolutionary American-style car leasing scheme, according to the Daily Telegraph newspaper.
Go deeper with GlobalData
The report said the scheme will enable drivers to own top-of-the-range models for a fraction of the price currently available on existing deals in Britain.
The cheapest car will be a Vauxhall Corsa, costing £99 ($US182) a month plus VAT. Under the plan, the dealer will pay the car’s £105-a-year road tax, while any servicing should fall under the manufacturer’s warranty, the newspaper said.
The Daily Telegraph said the scheme is being launched because of new EU legislation which gives car dealers the opportunity to sell a wider range of cars at lower prices for the first time – until now, car manufacturers had a stranglehold over the prices charged.
As well as transforming the lease market in Britain, experts reportedly said the move could trigger a car price war on all vehicles sold.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe only catch to leasing is that motorists may have to comply with mileage limits so that new cars are not driven excessive distances, the newspaper noted.
According to the Daily Telegraph, the leasing scheme is hugely popular in the United States, where it accounts for nearly 60% of cars on the road – for an all-in monthly cost of $400 (£216), Americans can drive away one of the smartest new 4x4s on the market while lease terms in the US normally run for two to three years, at the end of which the vehicle is returned to the car company or bought by the customer.
But if the American experience is anything to go by, British motorists will have to check the small print carefully on any leasehold agreements, the newspaper warned – in the US, the price demanded to buy the car at the end of the lease may be far more than the car is worth on the open market.
The first of the US-style leasehold schemes to be launched in Britain will be operated by the country’s second biggest car dealer, Reg Vardy, the Telegraph said, adding that Vardy plans to offer a full range of cars, although exact pricings are still being negotiated with the manufacturers.
Family saloons, such as the Renault Laguna or Nissan Primera, reportedly will cost between £150 and £200 a month, while a Mercedes C-Class or BMW 3-Series will cost £250 to £300 a month.
Prof Garel Rhys, the director of automotive research at Cardiff University, told the Daily Telegraph: “This is most interesting – it is a harbinger of the future. This is the start of things that people hope dealers will try to do.”
Power was shifting from carmakers to dealers, who are now allowed to sell a wider range under the new European Union legislation, he reportedly said, adding: “This is another way to sell nationwide. Other big dealers have not been able to do that. It shows that the dealers can act independently. It is a way to tie people to a Vardy dealership.”
Prof Rhys told the Daily Telegraph that Vardy’s plans could be a welcome spur to new car sales, which slipped 0.5% in June and 2.8% in May – “There are suggestions that the market is going off the boil. More initiatives like this could rekindle the flame.”
Robert Forrester, Vardy’s finance director, reportedly said customers would be able to order their new car over the internet and the dealer would then deliver the vehicle to the customer’s door.
He also reportedly said that the plans meant that Vardy would be able to sell to customers in the lucrative M25 region [the London metropolitan area; about the size of greater Los Angeles], even though the company’s 93 dealerships are based in the Midlands, north of England and Scotland.
According to the Daily Telegraph, car experts expressed surprise at Vardy’s low prices for the cars, which are about £100 cheaper than typical finance and car tax deals.
Rebecca Bell, a RAC spokeswoman, told the paper: “It sounds like an interesting deal – particularly when the cost of running a car can be more than the average mortgage.”
The paper said that a big plus for motorists is that Vardy will pick up the depreciation cost of the car – which Ms Bell reportedly said was “the biggest single cost” of buying a car.
Typically, a new Corsa is worth £1,754 less just three months after being bought, while a new Mercedes C-Class falls in value by £2,724 over the same period, the Telegraph noted.
Christopher Macgowan, chief executive of the Society of Motor Manufacturers and Traders, told the paper: “This is not being done to prop up flagging sales but to further enhance their [Vardy’s] market share.” He added: “This is very good news for the consumer.”
