Car finance, the banks and an unlevel playing field

New car sales may still have some way to go before they recover and may perhaps never reach the dizzy heights of 2,404,007 units in 2007, when car makers were churning out cars by the tanker load until the realisation dawned that they were chronically over producing. This has of course led to the current situation where demand for new cars has waned and production across the board has been cut drastically.

The fact remains though that during this year some car makers have hiked up prices as much as 3 times , which means that the deals to be had by customers will not feel nearly as good as previously, whatever the discount given. There are obviously some genuine reasons behind these prices rises such as currency issues and manufacturing costs but some feel this has been overhyped and that as usual the poor consumer pays the price.

Finding a funding solution for a car though is somewhat easier than trying to fund a house purchase at present and it is interesting to observe that the complexities behind financing a car sale and those behind a house sale are markedly different. For example when buying a new car most manufacturers provide their own subsidised finance packages to encourage the sale and these can often be at 0%, whereas if you want a mortgage right now you probably need a 20% minimum deposit and although the base rate of interest is half a percent the best deals you can get are around 6%! How do you work that out?

No the real difference is that although the car makers have contributed to their own demise to some extent, the banks have been totally culpable and have had billions in bailouts whilst giving absolutely nothing back to the consumer whilst, at the same time, continue to pay inflated bonuses to the privileged few at the higher end of the banking echelon.

The other aspect which stinks the place up, unless I am being totally naive, is that if 2 or more car dealer groups, who all sold similar cars in a certain region, got together and decided to sell cars at exactly the same price and give exactly the same kind of discounts it would be called a cartel, whereas banks can all set the same mortgage and loan rates and it’s all above board!