Today, discounts as big as 23.7% off a new car
Mystery shopping data reveals every car maker’s discount – but is it all smoke and mirrors?
Vauxhall is offering the biggest discounts of any car maker in the UK, with buyers able to negotiate an average saving of 17.5% off the list price of a new car when buying on a PCP finance deal.
Discounts on new Vauxhalls, taken from dealer margins and manufacturer deposit contributions, have increased significantly to £5459 per car from an average discount of 8.2% (£2282 per car) this time last year, according to data from What Car?’s Target Price.
Today, discounts as big as 23.7% – or £9278 – off the list price of a £40,140 Vauxhall Mokka Electric are achievable.
The What Car? Target Price is what Autocar’s sibling brand considers to be a fair, achievable price for a new car, as determined by a team of mystery shoppers. Vauxhall’s average discount comfortably eclipses the 12.5% of second-place Fiat and only Audi is above it in average cash discount terms, at £6282, bolstered by £15,000 finance contributions offered by Audi on the A8 – before any dealer discount on top. Vauxhall’s increase in discounting at a higher percentage off the list price coincides with a substantial increase in list prices.
The average on-the-road price of a Vauxhall today is £32,036 (this excludes the new Astra Electric, which was not on sale last year), with a Target Price average discount of £5982 reducing the price buyers should expect to pay to £26,054.
Opinion: Discounting is back with a vengence
Twelve months ago, the average list price of a new Vauxhall was £28,883 and the average discount was £2282, for a Target Price of £26,601. The addition of only the Vauxhall Astra Electric (average on-the-road price of £41,703 and a Target Price discount of £4937) allows for a Target Price-adjusted price of a new Vauxhall to have increased marginally year on year, at £26,814.
Higher list prices have been a feature of Vauxhall’s sales strategy over the past year as part of a plan to position the brand higher in the market.
Even so, discounting has returned to the UK car market as supply has increased after the semiconductor chip shortage while, at the same time, demand from buyers has cooled due to the cost of living crisis.
Vauxhall’s discounts are a combination of manufacturer contributions towards finance deals (an average of £3494 from Vauxhall, up from £869 last year) and dealers taking it out of their margins (an average of £1966).
A further reduction in monthly payments comes from Vauxhall increasing the guaranteed future value (GFV) of its cars at the end of a PCP deal when compared with CAP’s forecast residual values, from 96.1% of the CAP forecast value of the car to 101.1%, according to Target Price research.
Anything under 100% should be equity left in the car that a buyer could use as a deposit towards their next car, but with Vauxhall increasing GFVs, customers risk being left with no equity.
The raising of GFVs contributes to the Target Price monthly payments for a typical Vauxhall PCP deal (four years, 15% customer deposit) having dropped for a new Vauxhall despite the small net increase in price after discounting.
This is £311 per month now, down from £334 a year ago despite the average APR interest target set at 8.6% now versus 8.5% last year.
For Vauxhall, keeping residual values high is key to its desire for higher market positioning and the brand would not want to cut list prices because this risks harming residuals, as Tesla did.
That is why the discounts come from elsewhere, including dealer margins and deposit contributions, which alongside the APR rate and GFV changes have helped to reduce monthly PCP payments.
To that end, embedding higher list prices would allow Vauxhall to meaningfully charge more for its cars as market conditions allow and turn down incentives. Vauxhall has had some success in this regard with the Corsa Electric, Britain’s best-selling small electric car in 2023. Vauxhall has raised the list price of this car by 10% and has increased average PCP monthly payments by 5% to £394 per month by not discounting as heavily as with other models.
While the Vauxhall Mokka Electric can be had with that vast 23.7% saving off the list price, when it comes to the PCP monthly payment it’s only 5% less than last year due to an 11% increase in list price.
Only three brands offer no Target Price discounts in the UK: Smart, Polestar and Tesla. Even brands that have switched to the agency sales model – including Mercedes-Benz, which officially set prices with no scope for discounting – offer discounts with the likes of finance deposit contributions.
Other brands give less overt discounts by offering lower APR rates, so while this gives the illusion of no discounting, the customer ultimately pays a lower price through reduced monthly payments.
“The market-wide uplift in interest rates has generally polarised car manufacturers into two camps to try to stay competitive as demand weakens,” said a statement from the Target Price team. “Either lower the transaction PCP APRs or increase the finance deposit contributions (FDC). Vauxhall has clearly chosen the latter route, with FDCs up by more than 400% over the last year. “Boosting FDCs, and therefore lowering the perceived buying cost, tends to work better for the typical Vauxhall buyer demographic, who are typically also less resistant to higher APRs.”
Vauxhall wants to ‘democratise the electric revolution’
In response to Autocar’s report, Philip Douglass, marketing director of Vauxhall said: “We are aware of the cost pressures on households, particularly at present, and want to do all we can to ensure motoring remains affordable for as many people as possible.
“We are also determined to democratise the electric revolution and ensure it does not become a two-tier market reserved for those on higher incomes.
“Like any manufacturer, we periodically adjust our offers to ensure we are meeting these ambitions. We provide our customers with certainty and confidence by guaranteeing future values on our finance agreements.”
Target Price has been rolled into a wider product, Pricing Indicators, that houses make model derivative pricing data for all major cars on sale, and allows them to be searched and compared next to rivals on areas including cash pricing, OEM marketing deals, dealer discount data, APRs, monthly payments, PCP terms, and PCP contributions. If you are interested in using it for your business, please contact chris.daniels@haymarket.com
