European customers to benefit from discounts and deals

FRANKFURT (AFP) – The European car market may be slowly showing signs of stabilizing after years of crisis but cut-throat price wars still offer car buyers the chance to snap up a bargain.

When manufacturers lift the wraps on a flurry of new models at the IAA auto show, which opened in Frankfurt Thursday, customers stand to benefit once again as automakers slash prices even further, analysts said.

“With the market still characterized by overcapacity and manufacturers seeking to hold on to market share, there are a lot of discounts which means that mass producers are losing money in Europe,” said Yves Lacroix, analyst at Euler Hermes. And “with the market still depressed in 2013, we’re not expecting any easing of the downward pressure in prices,” said a spokeswoman for French maker Renault.

In Europe, French group Citroen, for example, is offering its C1 city car for just 7,990 euros ($10,550) after slapping on an “ecological bonus” of 200 euros plus a “green premium” of 3,710 euros if the buyer hands in their old car that is more than eight years old.

US giant Ford is offering a discount of 4,110 euros on its Fiesta model and offering to pay a premium of 1,000 euros to owners who hand in their old car, plus another 1,000 euros if the car is more than 10 years old. That leaves a purchase price of just 9,490 euros for the new car.

German giant Volkswagen, which for a long time resisted slashing prices, is also unable to buck the trend and the starting price for its Passat family car, including discounts and premiums, is now 22,030 euros.

In addition to the normal discounts, some carmakers dream up spectacular offers to win customers. South Korean maker Kia, for example, is offering free maintenance for seven years to anyone who buys its Carens multi-purpose vehicle.

And its compatriot Hyundai is offering to insure its French customers against a potential loss of job for up to 300 euros a month, plus personal coaching to find a new job. Such aggressive commercial practices are difficult to quantify and compare because of the many different forms they can take.

Nevertheless, according to analysis carried out by Observatoire Cetelem, such offers enable households to save up to 11 percent on the purchase price of a new car. The eurozone’s economic crisis and rising unemployment in a number of member states “have a direct impact on household sentiment and customers are loathe to make any large-scale purchases,” putting considerations such as safety, design and comfort lower down on their list of priorities than price, the study by Cetelem found.

Analysts are projecting a 5.0-percent decline in the European car market this year. Mid-range cars, which have seen a series of innovations in recent years, are being hit the most because they are now frequently too expensive. And top-of-the-range models that were able to resist the price wars for a long time are no longer proving immune.

“This segment is no longer holding up so well. The rebates can take various forms,” said Benard Jullien, a director at Gerpisa. For example, entry-level models in the premium segment “are much cheaper than in the past,” Jullien said.

By contrast, there are some branches of the automobile sector that seem to have escaped the trend so far. “Low-cost vehicles continue to see strong and robust demand among customers. Here, there is actually a situation of under-capacity. It’s a segment where makers don’t have to sell their vehicles at cut prices,” the analyst said.