Never a better time to buy (or lease)?

Has there ever been a better time to sell cars? In the midst of a recession, or at the very least a flat economy, it might sound ridiculous to suggest that buying a car is a good idea, but as a country we’ll still get through close to two million of them this year.CHAL Banner

Research by Sainsbury’s Bank suggested that 4.3 million Brits intend to buy a new car in the next six months. I would question the research’s validity as the record for car sales in the UK stands at 2,579,050 in 2003, and that was for a complete year. For the supermarket’s money box department to suggest we’ll triple that in tough times is, at the very least, somewhat optimistic.

Demand has dropped significantly and the manufacturers generally now respond by cutting production rather than stockpiling unsold cars on airfields. Just last month Vauxhall shut down both of its UK plants for a week in order to keep supply roughly aligned to demand, whilst today Volvo has announced a temporary suspension of production at their Torslanda plant.

This has led to some manufacturers ending up with significant waiting lists for new cars. At Audi it could be six months before you get your A3 and there’s a long line queuing up for the Range Rover Evoque. One buyer even reported that delivery of an MG6 might not be possible for a few days.

Dealers therefore aren’t struggling to sell the stock they have. They’re struggling to get stock in the first place, but that’s a different issue.

That lack of supply to meet the demand means that prices are actually rising, or rather discounts are disappearing. It’s not unheard of for buyers of more desirable but still ‘normal’ cars to look at nearly-new and pre-registered vehicles which could actually cost more than the new list price.

In doing that, the buyer is helping skew the market even further; if the nearly-new cars on sale are going up in price, those that are a year old will rise to fill the gap slightly. Older metal then goes up to fill that newly created void and so on, until you get to the banger end of the market that I thrive in.

Two years ago I bought a Lexus LS400 for £150. An equivalent one on Auto Trader now costs around £800. A Toyota Celica, Ford Ka, SAAB 900 and Vauxhall Omega all left me with change from £750 in total, yet I’d be hard pushed to replace any one of them for less than that total figure now.

With scrap values high even the very bottom of the market, the ‘project’ sales or those in need of ‘some TLC’, often don’t find their way to the market but end up as a cube swapped for a pile of cash.

The top and bottom then are getting tougher for the buyer, with prices rising. Sadly it’s the same story in the middle. A ‘stock drought’ is keeping part exchange values strong. Despite the age and mileage of part exchange vehicles remaining largely unchanged (at 99 months and 75,869 miles) values in August were up 11.6% up on the same period last year.

The SMMT has been keen to point out that the market for new registrations has risen by 3.3% since the beginning of the year, but not only is that increase made up by a lot of pre-registered vehicles, it’s also going to be a few years before any increase filters down in to feeding the starved used market.

It’s clear that, paradoxically, a struggling economy is bad news for vehicle prices. They’re only going to go up while supply is carefully managed to only just meet demand. There’s trouble lying ahead for those manufacturers that don’t manage that well; Renault has slashed its model range, Vauxhall/Opel is losing billions a year (around £10 billion in the last 12 years) and there’s talk of one major European manufacturer being at death’s door.

There’s good news too, though. The Bank of England base rate has remained at 0.5% for more than three years now, so finance rates are pretty good. When even a High Street bank will lend money at around 6% APR, you know that money isn’t expensive to borrow.

There’s a double whammy on lease deals too; the low finance rates combine with residual values that, as explained above, are rising while demand stalls, leading to some cracking deals. The class leading and efficient BMW 320d for less than £250 a month? Not a problem. A Jaguar XF for less than £275 a month? Also perfectly achievable.

What this all means is that if you’re in the fortunate position to be able to afford a change of vehicle, do it now. Don’t delay, don’t think it over one more time.

Whatever part of the market you’re in, from the bangernomics level to ordering a new Jaguar F-Type, I doubt there’ll be a better time to buy in the next couple of years.

Just look to either side of this column and find some deals for yourself now.

[button link=”http://www.contracthireandleasing.com/car-leasing-news/driving-a-delorean-in-the-dales/” rel=”nofollow” color=”orange”]This article was first published at ContractHireAndLeasing.com on 16 October 2012.[/button]

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Phil is a motoring writer for print and web, failed racing driver, car hoarder and banger rally competitor. Nominated for the Headline Auto Rising Star award and a MGMW member, Phil freelances for outlets as diverse as Diesel Car magazine, DAD.info and Cambridge Magazine, amongst many others. He also maintains a fleet of unloved motors, but spends most of his time driving an old Corvette.

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