So what do people think about the APs, you guys think theyll carry on getting bigger over the next 18 months?
The problem of higher and higher AP’s stretches right back to 2010, when the then chancellor, George Osborne changed the metric used to increase the allowances utilised on the scheme (WPMS/AFIP/DLA/PIP) from RPI to the lower CPI rate.
At first the gap between the two was relatively narrow, hardly noticeable on the AP’s in reality. However, year on year, the gap between how much car prices have increased and the increase in the allowances has widened considerably and is set to get even wider as time marches on.
The only metric which can be altered to cover this gap is the advance payment, which is why they have risen as the allowances have not kept pace with inflation, particularly on vehicles which are an expensive product to start with.
So, in real cash terms, if a £30,000 vehicle rose by say 3% this year it went up by £900. The mobility allowance allowance (I will use WPMS as that is the one I am most familiar with) rose by CPI at last September’s rate, so it only increased by £1.15 per week. That over the course of a 3 year lease is an increase of £179.40. So, it is £720 short of the vehicle’s increase in cost in year one. That is without taking into account inflation on other things Motability include such as tyres, insurance etc. A simple calculation example I know (ie not compunding it for years 2 & 3) but you get the gist I hope
Efficiency savings at Motability and the then ‘buoyant’ second-hand sales margins did mitigate some of this gap, but only to a point. It did allow Motability to increase the Good Condition Bonus for example to £600 (or £700/£900 where leases were extended) for example.
However, in the current economic climate I can hardly see the current Conservative chancellor (who just happens to be my MP!) changing allowance increases upwards to help mitigate the gap.
As to outriggers point regarding the offers running by manufacturers, they are targeted towards ‘discretionary’ customers.
The manufactures know that within a small median, Motability (and other fleet buyers) will buy ‘x’ number of cars from them ‘come what may’ as they have a relatively captive customer base. Thus, why give Motability or other fleet buyers any extra discount – unless they have a model they want to particularly off-load.
What manufacturers are chasing are the ‘discretionary customers’ who probably would not buy a brand-new car in normal circumstances. Put on a brilliant offer and try and change those discretionary customers from ‘not buying’ customers into ‘buying’ customers. Simples!
It is a business tactic that has been exploited by supermarkets and airlines etc for years as it is all ‘extra’ custom (thus profit) over and above their ‘expected’ sales.