Analysis of new car incentives – April 2020

Target Price March – Analysis of new car incentives

• The all-segment cash Target Price discount is unchanged for the third consecutive month, at 9%, or £3216 per car. Only the city car and small car segments have bucked this trend, with the typically achievable showroom savings down by 8.2% and 6.6%, in relative terms, respectively compared with last month.

• Additional demand created by the March new car sales period, together with ongoing industry attempts to build traction in reducing the amount of cash discount and finance-related support needed to sell new cars, have clearly contributed to this ongoing status quo in Target Price discounting. This is important to the whole industry, because average cash discounts are up to 31.5% higher, in relative terms, than they were six months ago.

• While manufacturers have managed to keep their average Target Price PCP finance terms unchanged at 4.6% APR with a finance deposit contribution of £1733 per car over the same period, this still represents an unsustainable level of new car sales support.

• The turbulence and uncertainty caused by the coronavirus pandemic will change all this thinking, because the industry must figure out how to maintain demand through this period. It is unclear yet whether additional cash discounting and finance-related stimulus will be used to encourage people to place their orders, or whether the fear of creating a fresh set of unsustainable customer discounting expectations post-pandemic will instead prompt the industry to ramp up its customer service actions, restrict supply and hope the crisis abates quickly.

• Citroën dealers are the most generous when offering an average cash Target Price discount across a model range of 16.6%.

Large SUVs

• Despite dealers’ efforts to try to reduce the upward trend in transaction price discounting across the large SUV segment, the average cash Target Price saving has increased slightly, to 7%, or £3483 per car.

• Customers can also take advantage of an average additional saving of £1889 per car when buying using a manufacturer-backed PCP finance scheme. This figure has increased by more than 16%, in relative terms, in recent months and currently represents more than a third of the total Target Price savings typically available across this sector of the market.

• The upward pressure on transaction price discounting, combined with the increase in manufacturer-backed finance support, reflects the fact that SUVs are losing some of their niche appeal as car makers continue to expand the number of models within each SUV segment. This is concerning for dealers, because SUVs are a focal point in the industry’s underlying goal to try to wean customers off the high levels of cash discounting and finance-based support that they have become used to.

• Six large SUV models can typically be bought with a double-digit cash Target Price saving, with Nissan, Renault and Mercedes-Benz offering the best deals at 18.1% (£5602 per car) on the X-Trail, 13.5% (£4018) on Koleos models and 12.1% (£5992) on GLC variants respectively.

• Seat dealers are offering the best PCP finance terms, with a 0% APR offer on the Tarraco, followed by Ford with a 1.9% APR deal and £1750 finance deposit contribution on the Kuga. Lexus, meanwhile, is offering a 3.9% APR with a £2000 deposit allowance on the NX.

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