“Why would any retailer sell a new car at cost price?”

With caution, I can announce that new cars at cost price (allegedly) are making a bit of a comeback in early 2024. The outlet responsible for this is the Hendy Group of franchised dealerships, representing more than a dozen manufacturers, including Renault, Nissan, Skoda, SEAT, Ford, Hyundai, Vauxhall and Land Rover.

The company’s intriguing Cost Price + £1 Event was launched quietly on 1 March. The offer is aimed more at retail customers and private motorists than business or fleet buyers, so that’s good news for drivers whose wages are struggling to keep up with the ever-growing cost of new vehicles. But interested consumers will have to be quick off the mark, because their written orders must be placed with Hendy by Monday (11 March). Why such an early cut-off point, I wonder?

Last week, after I stumbled across the surprisingly low-key roll-out of Hendy’s Cost Price + £1 Event, I spoke with staff at the firm’s corporate headquarters and salesmen on the showroom floors. All confirmed that they’re currently able to sell you a new car for a quid more than they paid the manufacturer for the same vehicle. Or to put this another way, give or take a few pennies, the retailer will allow you – the end user – to inherit its ‘basic profit margin’ – however low or high that is.

But the obvious question is this: how and why would Hendy, or any other retailer, go to all the time, trouble and expense of selling a car at or near cost price when such a sales tactic means that for every vehicle sold, there is all-but zero profitability? The answer comes from the other end of the sales chain, in the form of volume-related sales bonuses from the manufacturer. The more vehicles a retailer can sell or register, the more chance it has of reaching its monthly targets, which offer big financial rewards from the manufacturer(s) desperate to empty bulging compounds at their factories.

My initial enthusiasm for the deal was dampened when the Hendy head office staff and salesmen I spoke to were unable to give me a simple financial breakdown of how the deal might pan out for a buyer seeking a new car costing around, say, £40,000. Apparently, such quotes are more widely available to potential customers who turn up at Hendy showrooms on an ‘appointment only’ basis. Shame.

On this evidence, a car-at-cost-price system that operates in this way seems unnecessarily formal, horribly time-consuming and way too complicated/secretive for its own good.

Quicker, simpler and better by far are new cars blessed with widely advertised up-front discounts that are loud and clear. After failing to extract any numbers from Hendy last week, I spent two minutes searching the Carwow website for my favourite small, new SUV and found several with discounts of up to £4,785. With this sort of immediate, no-nonsense, temptingly transparent pricing, do we really need ‘cars at cost’ schemes that are about as clear as mud?

Do you agree with Mike? Let us know your thoughts in the comments section...