Vauxhall offering biggest discounts in UK as incentives return

Even so, discounting has returned to the UK car market as supply has increased after the semiconductor chip shortage while, at the same time, demand from buyers has cooled due to the cost of living crisis. 

Vauxhall’s discounts are a combination of manufacturer contributions towards finance deals (an average of £3494 from Vauxhall, up from £869 last year) and dealers taking it out of their margins (an average of £1966). 

A further reduction in monthly payments comes from Vauxhall increasing the guaranteed future value (GFV) of its cars at the end of a PCP deal when compared with CAP’s forecast residual values, from 96.1% of the CAP forecast value of the car to 101.1%, according to Target Price research. 

Anything under 100% should be equity left in the car that a buyer could use as a deposit towards their next car, but with Vauxhall increasing GFVs, customers risk being left with no equity. 

The raising of GFVs contributes to the Target Price monthly payments for a typical Vauxhall PCP deal (four years, 15% customer deposit) having dropped for a new Vauxhall despite the small net increase in price after discounting. 

This is £311 per month now, down from £334 a year ago despite the average APR interest target set at 8.6% now versus 8.5% last year. 

For Vauxhall, keeping residual values high is key to its desire for higher market positioning and the brand would not want to cut list prices because this risks harming residuals, as Tesla did. 

That is why the discounts come from elsewhere, including dealer margins and deposit contributions, which alongside the APR rate and GFV changes have helped to reduce monthly PCP payments. 

To that end, embedding higher list prices would allow Vauxhall to meaningfully charge more for its cars as market conditions allow and turn down incentives. Vauxhall has had some success in this regard with the Corsa Electric, Britain’s best-selling small electric car in 2023. Vauxhall has raised the list price of this car by 10% and has increased average PCP monthly payments by 5% to £394 per month by not discounting as heavily as with other models. 

While the Vauxhall Mokka Electric can be had with that vast 23.7% saving off the list price, when it comes to the PCP monthly payment it’s only 5% less than last year due to an 11% increase in list price. 

Only three brands offer no Target Price discounts in the UK: Smart, Polestar and Tesla. Even brands that have switched to the agency sales model – including Mercedes-Benz, which officially set prices with no scope for discounting – offer discounts with the likes of finance deposit contributions. 

Other brands give less overt discounts by offering lower APR rates, so while this gives the illusion of no discounting, the customer ultimately pays a lower price through reduced monthly payments.

“The market-wide uplift in interest rates has generally polarised car manufacturers into two camps to try to stay competitive as demand weakens,” said a statement from the Target Price team. “Either lower the transaction PCP APRs or increase the finance deposit contributions (FDC). Vauxhall has clearly chosen the latter route, with FDCs up by more than 400% over the last year. “Boosting FDCs, and therefore lowering the perceived buying cost, tends to work better for the typical Vauxhall buyer demographic, who are typically also less resistant to higher APRs.”