COMMENT
Great News For Car Buyers!

By Cliff D'Arcy
October 3, 2005

A new EU rule introduced on Saturday should, in time, lead to lower prices on new cars. It's the final piece of legislation designed to harmonise car prices across the European Union by reforming the sale and servicing of cars. It follows the abolition of the "block exemption" rule two years ago, which I explained in this article.

As from 1 October 2005, the EU no longer allows car manufacturers and dealers to restrict competition using a "location clause". Until now, manufacturers and distributors carefully managed the distribution of franchised dealers. They carved up the country by allowing only one official franchise in any given territory.

However, dealers can now start new franchises anywhere they choose, begin advertising in rivals' areas, and even expand into their turf. This new law also allows for the creation of multi-branded showrooms, allowing buyers to view, say, a range of French, German and Japanese vehicles under the same roof.

Hence, improved competition between dealers could trigger a price war, bringing down the cost of cars and associated services. For example, it could also lead to cheaper car servicing, as dealers go head-to-head in the lucrative after-sales market. Then again, tougher market conditions could lead to some small dealers going under, leaving a few large groups dominating new-car sales. Perversely, this legislation could end up reducing choice in some (mainly rural) areas!

Anyway, here are three ways to get a guaranteed saving on your next car, regardless of these changes!

1. Shop around

Although dealers have been given greater independence from carmakers, it's still up to you to shop around for your best deal. You can do this by haggling and playing dealers off against each other, as I explained in The Best Ways To Pay Less! If you're not much of a negotiator, this article lists a dozen websites which promise low prices on new cars (some sell used cars, too). You can learn more in our Car-buying Guide.

2. Be a better borrower

Dealers make more money from "F&I" (finance and insurance) than they do from "moving metal" (selling cars). So, tread carefully when a salesperson or business manager encourages you to take out dealer finance.

Personally, I wouldn't even buy 0% or low-cost dealer finance, because they make getting a discount off the list price much tougher. The majority of borrowers would be miles better off with a Best Buy personal loan, especially if they shop around online before signing on the dotted line. You can read more in Five Tips To Choose A Loan and Nifty Ways To Finance A Car.

You'll find the UK's cheapest Best Buy loan in our Personal Loans centre!

3. Watch out for expensive add-ons

As well as selling cars and finance, car dealers sell lots of other bells and whistles. However, many of these products are seriously overpriced, so think twice before buying them! Here are a few added extras to watch out for:

• Avoid payment protection insurance like the proverbial plague, because it's hugely over-priced and widely mis-sold. It's often the worst buy in the dealership!
• Along with almost all extended warranties, car warranties are usually very pricey and provide juicy commissions to the seller.
• Offers of free motor insurance frequently come with strings attached, and this "free" cover handicaps you when it comes to haggling.
• Breakdown cover from your dealer will usually come from The AA, RAC or Green Flag. However, new players are undercutting these big boys, so shop around for lower premiums.
• GAP insurance is another money-spinner. If your car is written off, your motor insurer may not pay out enough to clear your finance agreement, so GAP insurance covers this difference. This protection is expensive, complicated and riddled with get-out clauses, so it's best avoided!

Slash your motor insurance and breakdown cover premiums in our Insurance centre!

Happy motoring!

More: Find the perfect personal loan in our Loans centre | Ten Routes To Cheaper Motoring!