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The new car mystery

Car

By Finlo Rohrer
BBC News Magazine

As the global financial problems continue, the car industry is suffering badly, with new car sales down 36.8% in November. But how in the current climate could anybody be persuaded to buy a new car?

As most people already know, the car industry is in a spot of bother.

It has had some wonderful, blissful, dreamy years in the past decade. After starting to rise strongly in 1998, new car registrations in the UK reached a glorious peak in 2003. There were 2,579,050 units sold, according to the Society of Motor Manufacturers and Traders. The next year was only fractionally worse.

NEW CAR SALES
Peak year in 2003
Sales this year forecast at 2.1m
Lowest since 1996
Sales in 1991 during last recession at 1.6m
Figures: SMMT

Just four years on, sales are falling off a cliff, and the same picture is repeated in the US and around much of the world. Sales to private customers in the UK, which make up 42% of the units shifted, are worse affected even than fleet car and other business transactions.

But there's long been a puzzling thing about the car business. Why do people buy new cars at all? Motoring columnists have always drawn attention to the massive depreciation that many new cars suffer in their first year. In the old day, when cars were less reliable, buying a used car was seen as something of a gamble. But no longer. So why doesn't everybody just wait a year or two and then buy their dream car, hardly driven, at a bargain price?

For motoring journalist Paul Horrell, a consultant editor on Top Gear magazine, new cars are no more an illogical purchase than the various other products in the High Street that have been hit but are still selling.

Factory fresh

"It's no different than buying anything else. Why are people still buying new televisions?

"They want the newest thing and they want something that somebody else hasn't had before. The second-hand car looks like a bargain but some people just want something that's factory fresh."

Ford factory in Dagenham, 1931
The car industry is well used to the idea of boom and bust

That freshness is something that Bill Taylor likes. It's his answer to the question: "Why do you want to buy something that drops 25% in value as soon as you drive it out of the showroom?"

The retired IT director from Devizes has just got his hands on a Jaguar XJ. He loves the feeling of driving something that hasn't had another owner. Then, of course, there's the celebrated "new car smell".

"If you have a leather interior you can't fail to notice it. There is just something nice about having one that someone else hasn't despoiled. You know the history of it."

Mark Lavery, chief executive of Cambrai, the dealer chain where Mr Taylor bought his car, thinks much along the same lines.

Luxury brands

"There's nothing that smells nicer than a new car. I get a real buzz purely because of the smell.

"When you are the first owner, you know exactly where it has been, exactly what it's done. You park it in the garage and you know it hasn't been abused."

Car factory
Production will drop dramatically and eventually prices will go up

And, he says, there are some customers out there for whom even a dealer-checked used car can never be a truly safe purchase. They are conservative people who just cannot feel comfortable in a second-hand car.

Of course for those who do buy a car, particularly a luxury car, things have never been cheaper. Sales of luxury brands have been catastrophically affected. BMW's UK sales were down 41% in November. Mercedes were down 57%.

"There has been no better time to purchase a new or used car. The industry is having a torrid time," Mr Lavery admits.

Mr Taylor managed to get £6,000 off his Jaguar, but Mr Lavery has more extreme examples.

Work of art

A Jaguar XJR, slightly more than two years old, with 12,000 miles on the clock and a list price at sale of £62,000 would now be available for £20,000.

"A car like that would give a lot of people great joy. It is a work of art," Mr Lavery says.

On new cars he says there can also be big discounts. The old model, but brand new, Ford Fiesta Zetec, would be discounted by a third or more.

Frank Butcher in EastEnders
Some people can't trust any used car, no matter the provenance

But the car industry still needs to sell you its new cars.

Tom Pinsent, a planner at CHI & Partners, the advertising agency that handles several Toyota models, is one person who has that job.

He says the way new cars are advertised is changing. The classic car advert of the last two decades might be the shiny car hammering corners with a spectacular vista as an upbeat soundtrack makes you think of the words "status" and "symbol". But there's a new underlying theme.

"Increasingly people are buying cars on a rational level," says Pinsent.

"The price of petrol has been high for a long time and manufacturers are starting to produce cars with low CO2 emissions and high fuel efficiency.

Image statements

"We are talking to people in much more rational terms - CO2 and miles per gallon. Previously it was much more about lifestyle, tapping into emotion - you will feel bigger, you will feel better.

"[We are] not worried about shifting image statements now in selling cars - now a lot of ads talk about finance."

There is still an "emotional quotient" and Pinsent says you must still "respect the product", but the argument is less about the traditional ideas of a new car representing freedom and fun and more about practical concerns.

Car showroom
There is aggressive haggling going on around the country

If you want lower CO2 emissions either for environmental concerns or more mundane tax reasons, a second-hand car may just not wash.

There is still magic to be sold to the customer, stresses Alex Conaway, group account director at Weiden & Kennedy, who have handled well-known Honda adverts such as "The Cog" and the recent live advert.

"The first side is the rational argument. If you are buying a boxfresh car you are getting a three-year warranty direct from the manufacturer. If anything goes wrong you are protected.

"On the emotional side of things… [it's] getting people to fall in love with the brand, engaging people on an emotional level by telling stories about yourself."

And there's a curious factor about the current slump, the experts suggest. As manufacturers are slashing production, when the recovery eventually comes and you do fancy a new car, they might be in short supply.


Below is a selection of your comments.

I have just traded my Chrysler C300 in on a new Dodge Nitro. Prior to the Chrysler, Only once did I buy a new vehicle in 30 years of driving on both sides of the pond. A new vehicle lease plan is just an expense like rent or utilities. No longer am I buying a vehicle with the thought of having an asset, instead it is just a fixed cost to be managed like the rest of my budget. In the end, I have a new vehicle which I can trade again in 22 months, a guaranteed value of the vehicle if I keep it for the full lease, £300/month less in payments and the negative equity position of the Chrysler has been paid off by the dealer to incentivise the deal. Not too shabby
Aaron Cain, Calne UK

I think it's crazy to buy a new car unless you plan to own it for 10 years or more. After 20 years of driving I've only ever bought good quality used cars and have saved a small fortune by not having to pay for depreciation. Also, it's genuine recycling, all the environmental damage caused by manufacturing and delivery of a new vehicle is a high proportion of the environmental damage done by the car over its lifetime.
Mark Shepherd, London

I agree totally with the comments. There is nothing like the smell of a new car and driving one that nobody has had before. I felt this way all the time that I had a company car, paid for by others. Once I had to pay for a car, reality crept in. Modern cars are very reliable and so - I no longer feel the need to purchase expensive new cars.
Ron, Liverpool

Maybe I'm missing the point, but if people didn't buy new then there wouldn't be a second hand market?
Tim Coyle, Reading

I bought my car brand new from a dealership two years ago. Although it is my first car (which in itself is a gamble!!) I felt much safer buying a new car than a used one. You know its history, and you know how its been driven, which does make a difference. I know buying a brand new one for my first car was a mistake - considering just three months later I caused £400 damage to the front wing - but I feel much safer in it knowing that there is no hidden surprises in store.
Emma, Blackpool

Another reason people like new cars is that for the first three years the car is (usually!) in warranty and you don't need to get an MOT - it saves hassle therefore to keep the car for three years then chop it in for another new one, especially as most finance deals are 36 months!
Lucy, Maidstone, Kent

I just bought my wife a new car ~(Ford Fiesta old shape) rather than the older car she originally envisaged buying. It worked out cheaper to buy a new car because of the various discounts available and lower maintenance costs. Overall, I estimate that the overall cost of owning the new car will be significantly lower, even allowing for depreciation, over 2 years than buying an old car.
Alan Buchan, London

If you think losing half the value of a new car in a year is no fun, you could just buy some shares and watch them lose half their value in three months instead. That's why we need to spend our way out of recession; spread what little wealth there is around.
Straight down Bill Hill's..., Nottingham

I bought a brand new car (A Toyota Aygo) in June. It will be fully paid for in 3 years time. I saw it an an investment. It's a small eco-friendly car that gets 60mpg, so it's cheaper to run than my previous car (Ford Fiesta). I know exactly where it's been and that it's not been abused. In 3 years time I'll have a cheap, reliable little car that I don't owe a penny on.
Nicola, Sealand, UK

"A Jaguar XJR, slightly more than two years old, with 12,000 miles on the clock and a list price at sale of £62,000 would now be available for £20,000."

Is the new car smell really worth £42,000? I suspect not.
Sion Hughes, Northants



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