March set for a record as rates start to drop

Customers are returning to showrooms in record numbers to take advantage of the exceptional deals on offer. Carmakers have boosted special-offer finance packages to ensure March is likely to be a record month.

The captive finance houses have seen price cuts unleash a wave of pent-up demand. But it is still the well tried and tested marketing methods, such as low rate finance, which finally closes the deal.

Although some companies had started the year with short term plans in place, they were quickly rolled over to run for the whole of the first quarter. Ford added a couple of special edition Fiestas and, as always, remains one of the most active companies in the market with rates typically around 10%.

Rather than use a 0% interest rate package, Ford has opted for zero deposit on many of its conditional sale (HP) packages. The zero, or low, deposit route seems to be finding favour and has been adopted by Renault and Peugeot Ð both of which like to match deposit and monthly payments to create neat advertising packages (£199 deposit and £199 a month).

But 0% interest rate remains a favoured tool by others. Nissan has just re-entered the market with 0% across most of its models and it is also being used by both Daewoo and Fiat across the range. Volkswagen Financial Services remains the only major player outside the fold. But expect to see new deals from Audi and, possibly, VW, just in time for March.

The broad band of interest rates (around 12% to 13%) remains good but not exceptional and new car dealers using the captive finance house will have to be careful customers do not drift away to some of the special offers being promoted by the direct lenders (see below).

The latest figures from the Finance & Leasing Association reveal the trend for customers to arrange finance off-site is increasing. As banks and building societies become more aggressive in their selling techniques, dealers are in danger of seeing yet another profit opportunity slip way.