Car buyers: how to steer through the labyrinth of choice


For Ben and Pamela Thomas, the choice over whether or not to purchase an electrical automotive was determined by a stray roof tile. 

When a storm dislodged the ceramic projectile that wrote off their trusty VW Polo, they started the seek for a brand new mannequin, and had been eager to strive their first electrical automobile. Yet greater than a 12 months later, they’re nonetheless ready. 

At first, they waited months for an electrical Hyundai, just for the manufacturing facility to cancel the order weeks earlier than supply. 

Then a dealer they knew emailed, having discovered the similar mannequin — additionally model new — in stock. 

The lease deal allowed them to “try” the battery automotive for 2 years, says Ben Thomas, whereas the low working prices and environmental advantages appealed to the retired hospital supervisor.

Finally, in two weeks, they may get the likelihood to use the electrical charger they put in of their Surrey house final spring. 

Their buy displays the experiences — and frustrations — of thousands and thousands of UK motorists who navigate the car-buying course of. Decisions corresponding to whether or not to purchase electrical or not, deciding on a brand new or used mannequin and which of the myriad finance merchandise to use for the buy have turned the course of right into a labyrinth of selections. Added to this, latest manufacturing delays have prompted hold-ups for even the most decided purchaser.

And simply as new automobiles develop into costlier — with expensive electrical automobiles gaining in recognition — persistent inflation is sapping shoppers’ spending energy, whereas rising labour and materials prices and better rates of interest threaten to push up automotive mortgage costs. 

Waiting recreation: Ben and Pamela Thomas have been ready for his or her new electrical automotive for a 12 months © Daniel Jones/FT

New or used? 

Last summer season the manufacturing business was struck by a mixture of semiconductor shortages and Covid-related shutdowns in Chinese crops that provide intricate engine components. Global carmaking slowed to a trickle. 

This led to months-long ready occasions for even the most unexciting automotive fashions, and spilled over into unexpectedly excessive demand for second-hand automobiles. In the UK, as in lots of markets, the phenomenon propelled used automotive costs above the stage of new fashions.

This turned the business’s golden rule — that automobiles shed worth the second they drive off a forecourt — on its head, and ushered in a harvest season for the dealership business.

Car merchants, used to eking out revenue margins with canny buying and selling, merely had to take supply of new fashions, wait every week or so, after which flip them for extra money than they paid. 

Demand remains to be extremely excessive. Britain’s used automotive market recorded its strongest spring in three years, with 1.8mn automobiles bought between January and March this 12 months. There had been a report 82.5mn visits to the AutoTrader web site throughout March, 15 per cent larger than a 12 months earlier. 

“If you consider us as a bellwether, it’s a good sign that people are interested in buying cars,” says Ian Plummer, the on-line market’s chief industrial officer. 

“At one point, you know, we were discounting our cars between 5 and 10 per cent,” says Bill Berman, chief govt of Pendragon, one of the largest used automotive dealership teams in the UK. “We’re not having to discount vehicles at all.” 

Yet hints of normality are starting to reappear. Used automotive costs, which had been up by a 3rd in April 2022 in contrast with a 12 months earlier, at the moment are virtually flat in contrast with a 12 months in the past. The chip disaster can be starting to wane, and carmakers count on the faucets to flip again on later this 12 months.

The ready occasions for automobiles — which could possibly be years at the peak of the shortages — have fallen again to extra regular ranges. 

“Typically manufacturers are talking about delivery times of around 3-4 months, which is kind of where we were pre-Covid,” says Paul Harrison, director at, a comparability web site. 

However, used costs are probably to stay sturdy for years. The dearth of new automobiles attributable to manufacturing facility closures in spring 2020 will likely be felt as the gap in the market washes through the system. 

“We are short of 2.5mn cars that never got sold, and that will never exist as used vehicles,” says Dylan Setterfield at Cap HPI, an automotive information supplier. “That has a big impact on the used market.”

Line chart of Average price (£’000) showing A rough ride: UK used cars

Lease or purchase? 

The use of money or financial institution loans to purchase automobiles is lengthy gone. More than 90 per cent of new automotive gross sales are based mostly on a depreciation-based mannequin, whereas virtually half of second-hand gross sales use them as effectively. 

Under this association, a client funds the quantity of worth the automotive loses over a interval (sometimes three years), fairly than the old style “sticker price”.

The hottest finance deal, known as a private contract buy (PCP), provides shoppers the likelihood to purchase the automotive at the finish of the mortgage, or they will roll any equity in the automobile into a brand new deal.

This additionally explains the outsized progress of the premium manufacturers corresponding to BMW and Audi in the UK, as drivers discovered their merchandise, which have sturdy second-hand worth, simply as low cost to entry utilizing a PCP as a Ford or VW. 

It can be an more and more important assist for shoppers searching for a brand new mannequin: the common record value of a brand new automotive has risen by 38 per cent in simply three years. 

But borrowing money has develop into considerably costlier. APR offers of 0 per cent, as soon as virtually ubiquitous, are near-extinct.

The business is now in a “period of adjustment”, says Harrison at “We are now understanding what the true cost of new cars is versus the incredibly low rate environment we had all become used to.”

Costs are rising. VW says round one in 10 of its retail prospects have opted to prolong their PCP for an additional 12 months at the similar fee on the similar automotive, fairly than refresh their mannequin and lock in the next value.

“Consumers are looking to eke out as much value as they can,” Harrison says. “Within leasing, that means that people are typically going more for volume brands rather than premium.” 

Yet the actual image on financing prices is sophisticated. Lease charges on non-electric automobiles haven’t soared, whilst APRs climb from shut to zero into the double digits. 

“Affordability is not as bad as it seems,” says Mike Todd, head of monetary companies at VW in the UK.

Line chart of £ showing Average monthly vehicle leasing costs

A spike in the third quarter of final 12 months — coinciding with the market turmoil that surrounded the transient Liz Truss premiership — has subsided barely.

There are three drivers behind this. First, banks are resisting passing through larger charges. “Often changes in Q4 won’t be felt until Q2. [The banks] are trying not to pass it on,” says Harrison.

Second, the scarcity of used automobiles means residual values are sturdy. If automobiles lose much less worth, much less depreciation wants to be refinanced, so funds don’t climb as sharply even when borrowing prices have risen.

Another consequence is the sturdy resale worth of automobiles. Almost each purchaser taking out a PCP is buying and selling in a automobile that’s value way more than was anticipated in 2019. This means they’ve extra equity in the automobile, which they will roll into the subsequent deal, appearing as a bigger deposit and decreasing their month-to-month funds.

The upshot is that, despite the fact that marketed prices are larger, as soon as individuals get into the particulars, they arrive down.

“In reality, today’s customer, because of residual values, has got more equity in their vehicle than they would have had three years ago when part-exchanging a 2017 car,” says Todd at VW.

Battery or fuel-burner?

The burning query for anybody searching for a brand new mannequin is whether or not to embrace the forthcoming electrical period or have one other spherical in an engine-powered automotive — petrol, diesel or, more and more, hybrid. 

New electrical automobiles stay doggedly costly on sticker costs, however the prevalence of finance offers can deliver higher worth. 

EVs are cheaper to run, with a mixture of decrease (although not zero) refuelling prices and cheaper upkeep. Most new automobiles include an eight-year battery guarantee.

While the headline UK authorities incentive, the “plug in car grant”, has been scrapped, there may be nonetheless a wealthy abundance of subsidies if you understand the place to look.

Top of this pile is for workers who can persuade their corporations to open wage sacrifice schemes so a automotive could be paid for out of pre-taxed revenue, thus decreasing an worker’s tax invoice. The present system closely incentivises electrical automobiles.

“Overall, it’s still the case that salary sacrifice is cheaper when getting an EV compared to a petrol car,” says Fiona Howarth, chief govt of Octopus EV, an electrical automobile leasing group.

According to Octopus’s on-line calculator, an electrical Renault Zoe is £409.30 a month, in contrast with £287.32 for its petrol cousin, the Clio. But the Clio racks up larger prices as soon as upkeep, servicing and — importantly — gas prices are lumped in. 

Octopus expects that, for a fundamental fee taxpayer, the electrical could possibly be virtually £250 a 12 months cheaper. Higher up the tax brackets, the hole widens. 

When bought by a 40 per cent larger fee taxpayer, a Tesla Model Y has virtually £2,000 a 12 months saving over an Audi Q3, regardless of each automobiles being near-identical of their £449-a-month lease funds, the calculator says.

For somebody paying the prime fee of revenue tax at 45 per cent, Audi’s electrical e-tron GT — an £85,000 sports activities automotive — saves £5,000 a 12 months in contrast with the high-powered Audi RS4.

“Electrification will actually be acting as an accelerator of the [leasing] trend,” says Annie Pin, chief industrial officer of leasing firm ALD. “Today an electric vehicle is quite expensive so actually people will have a tendency to lease it.”

Four occasions as many individuals in the UK purchase used automobiles fairly than new. The first wave of mass-market long-range EVs, bought round the flip of the decade as new emissions guidelines kicked in, are simply beginning to come into the second-hand market.

This has posed an issue for sellers, none greater than Tesla, which runs its personal showrooms.

Elon Musk’s electrical automotive model could have garnered world headlines by reducing costs of new automobiles, however it has mishandled its promoting of second-hand fashions, typically releasing them into the market too cheaply and so damaging the general residual values of its model new automobiles, in accordance to a number of individuals in the business. 

Used EV costs throughout the board have fallen steadily for eight months, as the provide of second-hand fashions floods a market that’s nonetheless, broadly, cautious of the new know-how.

“It feels like there has never been a better time to buy a used EV,” says Lauren Pamma, director at the Green Finance Institute.

A 3-year-old electrical Jaguar I-Pace is cheaper than the model’s engine-version F-Pace, a three-year-old battery Renault Zoe is cheaper than its petrol Clio cousin, whereas a Tesla Model 3 and a BMW 3 collection — as soon as separated by £22,000 — at the moment are solely £3,000 aside, she says. 

Electric cars being charged
Used electrical automobile costs throughout the board have fallen steadily this 12 months © Matt Cardy/Getty Images

“There is a massive need to develop a [functioning] used market for electric vehicles,” says Toby Poston, head of coverage at the British Van and Rental Leasing Association, the trade physique for fleet consumers that account for round half the UK’s automobile purchases.

Slowly, training and expertise helps to assuage consumers’ considerations over EVs. 

One of the earliest fears was that batteries would smoke out after solely a handful of years. Yet a research by telematics firm Geotab discovered {that a} fleet of 6,000 EVs, working thousands and thousands of miles between them, suffered solely 2 per cent degradation per 12 months. This would imply an EV coming off a three-year lease nonetheless has 94 per cent of its battery in use, far larger than beforehand feared.

Evidence from the US reveals that EVs with a “battery certificate” to quantify their well being standing fetched higher costs than these with out. Pamma reckons that battery certificates “are the single biggest thing that will persuade people to jump into a used EV”.

The EV shift additionally loosens the ties that prospects have to conventional manufacturers and even brings premium and mass market segments nearer collectively. 

If each automobile accelerates like a sports activities automotive, then shoppers could also be much less keen to pay extra merely for nicer interiors.

“Consumers are hopping from looking at an Audi to a car from Škoda to a car from Kia,” says Ginny Buckley, director at client recommendation web site “Five years ago that was thinkable. But electrification has really opened that up.”

‘Charging your car is just another thing to remember’

Living in London with a driveway ought to make Kirsten Snelling a great buyer for an electrical automobile.

With round 42,000 public charging factors accessible and 1mn electrical automobiles on UK roads, the business expects the majority of EV charging to occur on driveways or at office automotive parks.

But when her three-year outdated Mazda crossover got here to get replaced, Snelling received the map out. The basic mixture of the college run and errands meant most journeys had been manageable, even in an electrical automotive with a brief vary. 

But frequent journeys to see buddies in Cornwall, leaving her reliant on the motorway community for charging, in addition to considerations about needing to ferry two youngsters, meant she was not but prepared to take the leap.

“I know charging at home is easy but if anything goes wrong there could be big consequences, especially when travelling with kids,” she explains. 

In the finish, she ordered the similar Mazda once more — despite the fact that the funds had risen by virtually £80 a month. 

“It already feels like, more often than not, it’s the woman of the household that carries the mental load for the family, and [the charging] is just another thing to remember that I know will fall to me.”

Ben Thomas, on the different hand, was happier to take the threat, despite the fact that it’s a lengthy drive from his Surrey house to see his youngsters close to Manchester. 

Under his lease settlement, “we are only tied in for a couple of years, so we can try the car,” says the retired hospital supervisor. 

“It’s partly the environmental thing, but the running costs should be cheaper,” he provides. “And so we thought we wanted to give it a go.”

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