At this time of year, it’s difficult to juggle all the different demands on time we have as professionals, with the temptation being to ‘look at this in the new year’.
We’ve prepared this guide to support your awareness of where we stand in the car industry in late 2023, and how this may play into your hands.
The industry has had well-documented struggles during the COVID and post-COVID era, particularly with regards to supply chain constraints. This has, in turn, led to a period of price increases, combined with the removal of many discounts, as manufacturers struggled to make a higher gross margin from the limited units they had to sell.
Once you combine this with the interest rate rises, we’ve seen over the last 2 years, financing your car has, like many things it seems, got a lot more expensive.
Cue October 2023, and a seismic shift back in favour of the consumer. Little more than a year ago, the likes of Harald Wilhelm, CFO of Mercedes’ parent Daimler, were suggesting they would “consciously undersupply demand” to avoid having to discount to consumers. We’re now seeing models such as the EQC attract a 30% discount from list price, meaning clients can now save circa. £25,000 on this model as one example.
All this makes December 2023 a fairly unique time to source your new car, with all manufacturers currently some way behind their original targets, and desperate to make up what ground they can.
As we reach January 2024, we expect to see the counters reset, and prices will inevitably rise as manufacturers wait to see the lie of the land, and from a sales targets point of view, are likely to be pursuing more modest figures, with the corresponding removal of some of the most attractive offers.
What does this mean for you – Our brand-by-brand guide to what is happening in the market in December 2023…
The German manufacturer bucked the trend of its two main rivals, and moved early on offering discounts to stimulate demand in 2023. We’ve seen the likes of the Audi Q5 actually come out cheaper than 3-4 years ago, which given over 20% compound inflation in that time, is a testament to the exceptional value the brand offer.
Audi particularly emphasise ‘loyalty’ offers to existing clients, so worth noting if you’re an Audi driver. They’re also open to preferential early termination of your current contract, meaning you may be able to hop on the best offers now.
In EV-world, the Q4 E Tron has gone from an 18-month lead time, to heavily discounted special offers, so worth reviewing if you have access to a salary sacrifice scheme, or indeed own a business.
BMW and Mercedes
Audi’s two main rivals are in very similar positions, having spent the first half of the year being conservative on pricing, and now spending the final quarter offering huge discounts and special offers across much of their model range.
A definite ‘buyers’ market’ for both these brands in December 2023, as both look to make up ground on a tough 2023 comparatively (Audi are 26% up on 2022, while Mercedes are 5% up and BMW just 2% up).
There is stock, there are promotional APRs, and there are ‘batches’ of cars, such as the special offer just launched on 260 Mini Countryman’s through P+B funding partner, Novuna.
Land Rover and Porsche
Perhaps the two brands who have handled client experiences the most poorly throughout the post-COVID period, it remains to be seen what the longer-term brand damage may be to Land Rover and Porsche, who both continue to refuse to offer price protection to clients ordering, bucking the trend of the overall market.
Whilst both brands were at the extreme end of pricing and supply chain challenges, both now have stock to offer, and not coincidentally you should be looking to secure discounts on pretty much every model.
Land Rover have the added challenge of cancellations arising from sky-high insurance premiums, meaning there are some expensive pieces of metal looking for a home urgently, always a positive for buyers in the market.
Volkswagen have been steadily working through their supply chain issues, and continue to have challenges with delays to the likes of Golf and Tiguan.
That being said, there are some very strong offers on most of the brand’s core cars, with models such as Golf, Polo, Tiguan and Touareg all on special offer for a 2024 delivery. It remains to be seen if these discounts will continue into January, but what is certain is that we will see a list price increase in early 2024, so again, December may well be the peak time to order.
Volkswagen Group – Other
There are lots of offers available on EVs in these brands, with the Skoda Enyaq on promotion, as well as a range of cheap pricing on the Cupra Born.
We’re also seeing the Skoda Karoq SUV and the Seat Ateca (as a cheaper alternative to the VW Tiguan) well priced at present.
A note on financing options and interest Rates
The financial markets aren’t expecting much change to interest rates from the Bank of England in the coming months, so as the mortgage industry rates may well have peaked, so too car finance options seem to be offering more competitive rates.
With leasing, you’ll not see the underlying APR rate of interest, but some of the manufacturers are now offering either 0% for certain models, such as Volvo, or 2.9% in the case of BMW.
One word of warning, it is worth consulting with an expert though, as manufacturers do occasionally use low interest rates as a marketing ‘hook’ when, in reality, the low interest rate is instead of the market rate level of discount. Essentially a car that should have 15% discount, but is offered at list price with zero discount, and with a 2.9% APR does not represent good value.
It has been an incredibly volatile market in the car industry since 2020, but signs are that we are now returning to some version of the pre-pandemic normality.
Your monthly payment will likely be higher than its 2019-2020 equivalent, but then it is likely your earnings, and indeed many other costs are similarly higher in value.
What is without doubt is that the car industry has, just in this quarter, returned to a ‘push’ status, with manufacturers holding stock and therefore needing to discount to stimulate sales.
Most manufacturers pause on pricing decisions in the new year, to see how the land lies, before giving away too much in margin, as well as normally rising their core ‘list prices’ in the new quarter, so the plan to put things off to the new year may well not pay dividends.
At Pike + Bambridge, we’re here to help you navigate the complex and time-consuming process of buying a car, so do get in touch with your Relationship Manager, or the team at firstname.lastname@example.org if you’d like to find out more.