Car bargains galore coming up - but buyers beware

According to a number of dealers I spoke to, if interest rates keep on climbing, then the first half of next year will see a lot more very creative discounting.

Resale values

Of course, the motor industry doesn't call this discounting because that's something that has proved to be extremely dangerous, mainly because it messes with resale values. Not only of cars bought at a discount but those for whom customers paid the full price.

But, that doesn't seem to be deterring certain dealers who are discounting anyway without fear of reprisal from the motor manufacturers, given that earlier this year price fixing by manufacturers and distributors was outlawed.

But, mainly they're getting around overt discounting by introducing "cash-backs" which essentially means that the buyer pays the full price for the car and then gets the equivalent of anything from 10 to 20% back in cash.

Residual deals

Many are also offering "discounts" by way of finance packages. This can include all sorts of things such as subsidised interest rates, staggered start dates in which buyers take delivery of a car and don't start paying for it for anything up to six months. Then, of course, there are residual deals which lower the monthly repayment amount, added to which many manufacturers are offering guaranteed buy backs.

But, buyers need to be beware. Because there are all sorts of hidden dangers. For example, when start dates on repayments are staggered, the full price of the vehicle is charged and virtually no free extras are added. Which means that buyers are actually paying a bit more for the car than if they'd opted to start their payments immediately.

Stepping payments

Then there are those dastardly stepped payments. What happens here is that a buyer takes a car on a four- or five-year hire purchase deal and for the first year only pays, say, R2999 a month. The following year this repayment is stepped up to R3500 and the following year it goes up again, until in the final year it is, say, R4500.

Motor car dealers, manufacturers and distributors can be extremely creative when it comes to enticing the public to buy cars when inventories are running too high. The unwary buyer can end up thinking he has got a great deal or discount, when in fact he has actually just paid the full price one way or another.

But, the clever consumer who ignores all the enticing deals and gets involved in some serious horse trading can end up with a bargain.