Out of road

Could cars be slid­ing to­wards bank­ing lev­els of con­sumer con­tempt?

Campaign UK - - NEWS -

Banks were not al­ways hated. True, they might never have been loved, with their haugh­ti­ness and stiff ways, but that did at least trans­late into a low-key re­spect and sug­gest a cer­tain pro­bity. The lo­cal man­ager was a suit­ably dull em­bod­i­ment of trust. And when a branch packed up and left town, leav­ing a pizza restau­rant be­hind in its sturdy for­mer premises, we were sur­prised to find our­selves miss­ing it emo­tion­ally as well as prac­ti­cally.

The slide into neg­li­gence was slow – hid­den charges, mis­selling, bloated prof­its – but the flip to be­com­ing ob­jects of seething rage was sud­den and blood­cur­dling. Once we knew that even they didn’t un­der­stand the com­plex fi­nan­cial in­stru­ments they were trad­ing, and that they were gam­bling big with our money, the flood­gates of loathing were open.

Brave bank mar­keters, years af­ter the cri­sis, would com­mis­sion con­sumer re­search and be dis­mayed by the vir­u­lence of the venom. I have seen my fair share of “word clouds” in mar­ket­ing pre­sen­ta­tions over the years, but noth­ing quite pre­pares you for the bank ones, which look like they might be de­scrib­ing a slave-trad­ing ring: “SCUM” reads the giant word in the cen­tre, bordered by “sleaze”, “greed”, “crooks” and vari­ant in­sults into the outer mar­gins.

There is an in­ter­est­ing game mar­keters can play here: who are the next “banks”? Which is the cat­e­gory that has been slid­ing into the neg­a­tive side of the ap­proval spec­trum and is ready to flip into out­right con­tempt? Sug­ary drinks, en­ergy com­pa­nies and mo­bile providers are peren­nial con­tenders. Po­lit­i­cal par­ties: of course. But the sec­tor my money is on is cars.

As with the banks, the slide from grace has been grad­ual. Used-car sales­men never had a great rep­u­ta­tion but the glam­our and ex­cite­ment of new model launches helped us draw a veil over that. And cars had steadily be­come more re­li­able, ef­fi­cient and kin­der to the en­vi­ron­ment.

Or so we thought. The rev­e­la­tion of cheat­ing on emis­sions by Volk­swa­gen – then Mill­ward Brown’s fifth most trusted global brand – was a jaw-drop­per. The ques­tion be­came whether the prac­tice was gen­eral or con­tained. Sea­soned mo­tor­ing cor­re­spon­dents are scep­ti­cal: en­gi­neers in the au­to­mo­tive in­dus­try are pro­mis­cu­ous, mov­ing where the money takes them, and few doubt that those com­ing from V W would not have brought their “spe­cial ex­per­tise” with them.

More re­cently the per­cep­tual slide has steep­ened with the in­crease in model re­calls, which are cur­rently the high­est on record (see panel).

The scene of the fi­nal crash in con­fi­dence, though, is likely to be the pre­car­i­ous cross­roads where new car sales meets con­sumer credit.

Auto brands rou­tinely make far more profit from their fi­nance arms than they do from man­u­fac­tur­ing ve­hi­cles, and the fi­nan­cial en­gi­neer­ing they un­der­take is as elab­o­rate as any­thing in the metal.

That com­plex­ity reached its zenith in the per­sonal con­tract pur­chase agree­ment (PCP). Is it a hire­pur­chase model? Not ex­actly. Is it leas­ing? Kind of, and kind of not. Is it some sort of part-ex­change deal? It is, with bells and whis­tles in abun­dance.

What makes PCPS at­trac­tive for con­sumers is the low head­line price of the car: they can drive away a new BMW for less than the cost of a used Ford. But that is achieved through a range of com­plex vari­ables in­clud­ing an es­ti­mate of the fu­ture trade-in value of the car, main­te­nance tie-ins and mileage lim­its.

The Fi­nan­cial Con­duct Author­ity is set to in­ves­ti­gate, look­ing at ac­cu­sa­tions of fail­ure to prop­erly ex­plain the ar­range­ments to con­sumers. But that is as likely to spring from ig­no­rance as neg­li­gence, with sales­peo­ple un­able to fully grasp the myr­iad im­pli­ca­tions of what they are sell­ing.

It’s hard to think of an in­stru­ment that re­minds you more of the sub-prime mort­gage bonds: the abil­ity to own more than can strictly be af­forded, the de­fer­ment of true cost, the byzan­tine com­plex­ity. With 80% of new cars now sold this way, the in­dus­try and its cus­tomers could be stor­ing up prob­lems for the fu­ture.

Banks may never have been loved but cars are. Sym­bols of free­dom and ad­ven­ture de­spite the ev­ery­day re­al­ity of traf­fic and fumes. Mo­bile ex­ten­sions of our per­son­al­i­ties. But that high es­teem will make the fall, if it comes, so much harder.

Will au­to­mo­tive mar­keters soon find them­selves com­mis­sion­ing con­sumer re­search and reel­ing at the vir­u­lence of the venom? Star­ing at hos­tile word­clouds and won­der­ing where it all went wrong?

It’s hard to imag­ine it could ever get that bad.

But then, back in 2007, it was hard to imag­ine what would come in 2008.

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