Bag a bargain as car sales plunge

New-car sales tumbled last month, so here's how to beat the dealer when you buy.

Once again, it’s looking fragile on the forecourts, as sales of new cars slide for the first time in a year.

New-car sales tumble in July

After 12 monthly rises in a row, new-car sales fell in July 2010, according to the Society of Motor Manufacturers and Traders (SMMT).

In total, 136,446 new cars were privately registered in July, normally a slow month for car sales. Sales were down more than more than an eighth (13.2%) on the figure for July 2009. However, even after July’s fall, new-car sales are up more than a seventh (15.1%) in the first seven months of this year compared to the same period of 2009.

The SMMT estimates that 2.018 million new cars will be sold in 2010, which is a mere 1.2% above the total for 2009. Worryingly, the motor trade’s leading association expects sales to slip 15% during the remainder of 2010.

Scrappage gets scrapped

One reason for the recent decline in car sales is the expiry of the UK Scrappage Incentive Scheme on 31 March 2010.

According to the government, this scheme generated close to 400,000 new-car registrations since its launch on 18 May 2009. With HM Treasury paying a bribe of £1,000 per car to replace old bangers with new cars (plus another £1,000 from dealers), this scheme cost taxpayers a total of £400 million.

Now that this one-off boost to sales has ended, car dealers are going to find it a lot harder to ‘move metal’. Therefore, this shifts the balance of power in favour of consumers, allowing buyers to strike a better deal.

What seems likely is that scrappage will become ‘swappage’, where dealers offer better terms to consumers trading in an existing model for a new car. In some cases, these incentives could mean as much as £2,000 off the list price.

Drive a hard bargain

If you’re looking to buy a new car at a bargain price, then try heading for the dealership this month. This is because August is a terrible time for car dealers, when sales drop to their lowest levels, partly because of the peak holiday season.

Also, with the new ‘60’ registration plate arriving on September, dealers are desperate to get ‘10’ registered cars off their forecourts in order to make way for new models. So, haggling with the salesperson can be easier in August than in any other month.

Before you head off to the showroom, try these tips for size:

1) Concentrate on the car

The most important thing to bear in mind when shopping around for a new car is to stay focused on getting the best possible discount for the vehicle. Always remember that the list price is the maximum price and not the price you want to pay.

Indeed, with a bit of haggling, you should be able to get a decent discount on the list price, especially if a swappage deal is on offer. As well as comparing prices online, call a few local dealers and car supermarkets to find out their best price. What Car?’s Target Price is a good starting point.

If the salesperson isn’t keen to meet your ideal price, then demand a few free upgrades and extras. For example, ask for one of more of these to be thrown in gratis: a full tank of fuel, a year’s road tax, metallic paint, car alarm, extended warranty, etc. There’s no harm in asking!

2) Beware of dealer finance

Past surveys show that dealer finance arranged in the showroom can work out a lot more expensive than making your own arrangements to pay. Even interest-free 0% finance can be a problem, as it may prevent you from getting the lowest price for the vehicle.

Personally, I’d pay for a car using existing savings or a Best Buy unsecured personal loan. According to one survey by the AA, finding the right finance could save you up to £2,000. Therefore, don’t sign on the dotted line without doing your homework first.

3) Say no to add-ons

If you think that dealers are in the business of selling cars, then you’re only half right. That’s because they can make as much money from selling F&I (finance & insurance) as they can from selling cars.

In fact, the profit margins on these financial add-ons are often sky-high. Such low-value, high-cost products include pathetic payment protection insurance, expensive extended warranties, grotty GAP insurance and bad breakdown cover.

Personally, I wouldn’t touch these overpriced policies with the proverbial bargepole. However, if you really feel that you need some protection of this kind, then shop around online for a value-for-money policy. Of course, you must do the same for your car insurance at every renewal, too.

4) Import from abroad

Contrary to popular belief, it’s quite straightforward to order a right-hand drive, UK-specification car from a European dealer or broker and have it delivered to your UK address. Indeed, the Internet enables you to do this from the comfort of your favourite chair.

What’s more, new-car sales fell very heavily in several European countries in July, according to research firm JD Power. Sales in Germany (Europe's largest market for cars) fell more than 30%; in Italy, more than 26%; and in Spain, over 24%.

Hence, with car sales plummeting in these countries, you may be able to drive a harder bargain from a Continental dealer. For more advice on importing cars, read this Top Gear guide.

Here’s wishing you many miles of happy motoring!

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