Death of the sticker price?We are all familiar with the habit of car manufacturers providing a list, or sticker, price for their cars. If nothing else it gives us an idea of how big a discount we have managed to negotiate with the dealer. Now though, car manufacturers are set to abandon the practice and concentrate instead on telling us the monthly cost of buying their cars.
We are all familiar with the habit of car manufacturers providing a list, or sticker, price for their cars. If nothing else it gives us an idea of how big a discount we have managed to negotiate with the dealer. Now though, car manufacturers are set to abandon the practice and concentrate instead on telling us the monthly cost of buying their cars. One factor driving the change is the advent of electric cars. Many manufactures insist on renting, rather than selling, the battery packs and this results in monthly tariffs, not unlike a mobile phone contract. BMW's head of mobility sales, Tony Douglas, explains: "The days of the headline figure are numbered. In reality it has very little to do with what's debited every month.
It seems that as consumers we are becoming much more used to monthly figures as we increasingly buy cars using finance products. Head of Citroen in the UK, Linda Jackson, comments: "People are using finance a lot, lot more. They like understanding what they're paying each month." In the case of the French firm's fashionable DS3 hatchback, for example, 85% of customers buy the cars on finance. These cars are sold on personal contract purchase deals (PCP) where the monthly cost is calculated, not on the value of the car, but on the value it loses during the term of the deal.
Because the cost is so dependent on depreciation, this means that a more expensive car with less depreciation can actually have lower monthly payments than a cheaper car where depreciation is steeper. This situation again mimics the likes of phone contracts, where very few customers buy the phone outright or are even concerned with the full hardware cost. Instead, that market is almost entirely focused on monthly contract payments. These phone contracts typically bundle a list of services, including call time, texts and data volumes. It seems that the car industry is cottoning on to this and they are increasingly offering all in one packages with insurance and servicing costs included.
This may seem like good news for the motorist who may now just have to compare a single monthly cost but there are dangers inherent in the system for the consumer. Bundling services into a single monthly charge makes it less clear for the motorist exactly what they are paying for each element of the agreement and whether or not that is a good deal. Customers will also have to come to grips with the notion that they no longer actually own the car they are driving.
Posted by Edwin Miles on