Will higher interest charges increase the price of your next car?

Undated handout photo issued by Ford of a worker at the car manufacturer's plant in Halewood, Mersey

Car giant Ford is to invest £230 million to transform its Halewood plant to build electric power units for future Ford all-electric passenger and commercial vehicles in Europe - Credit: PA

With much dialogue around interest charges likely to increase as a result of higher inflation, should you be concerned this could make your new purchase more expensive?

The Bank of England is expected to increase rates from the lowest ever seen to a 0.75 per cent rate by the middle of next year.

Already some of the very low mortgage rates available for house purchases are coming to an end but these rates have been used to stimulate the market during the Covid crisis.

Manufacturers have been offering competitive interest rate leasing deals on new vehicles for many years and with the market falling at an alarming pace, this is unlikely to come to an end in the foreseeable future, but there is the possibility hire purchase rates could increase slightly.

This is less likely on used vehicles where interest rates are fairly stable and commensurate with the age of vehicle and risk involved.

Although there is a shortage of used vehicles, dealers are relying on volumes to contribute to the lack of new vehicle profit caused by the semi-conductor shortage, leaving dealers with very low stocks. 

The market for October confirmed this with registrations falling almost 25 per cent, making it the worst October since 1991, and it is unlikely that the supply will improve until the second quarter of 2022.

Most Read

Naturally, the emphasis is on taking orders and manufacturers and dealers have attractive offers to make it intelligent to sign up for delivery in 2022, now.

Manufacturers are also extending leases to take customers through the additional time it takes their replacement car to arrive.

If you have a change in prospect in the next six months talk to your dealer and find out what options are available to you.

It may prevent a problem and you are likely to get a price guarantee.

Looking at the October market in a little more detail, plug-in vehicles accounted for over 23 per cent of all new car registrations and when added to by another 8.1 per cent from hybrid electric vehicles, means that almost a third of the new car market has been electrified in the month.

The year-to-date figures are running at over a quarter of the market which may surprise a number of people.

This share is expected to grow in 2022 with more demand for plug-ins expected to continue with new BEVs alone taking over a fifth of the market.

More money is being allocated to councils to provide more charging points and they will be joined by the private suppliers such as Gridserve and BP Pulse investing in large charging stations resembling the petrol stations we have today.

This must happen to make charging easy.

Supermarkets and retail centres will also need to provide charging stations if they want to encourage their customers to visit, stay longer, and increase their spend.  

The motor industry, along with many others, is trying to address a shortage of skilled workers and there are a number of applicants who would like to relocate to this area.

The problem is the shortage and price of property in the region, which is having a detrimental effect and with more and more people believing they can work from home, this is a pressure which can only get more difficult. 

Keep safe and keep smiling, I look forward to next week.