Ford’s on a drive to break into savings
THE YEAR has not started too well for car manufacturers, if research from motoring association the AA is anything to go by. Having surveyed over 15,000 of its members across the UK, the organisation found that around one-quarter expect car prices to rise as a result of the UK’s ongoing Brexit negotiations, with the proportion rising to just under one-third in Scotland.
The result? Six per cent are putting off buying a new car until the full impact of Brexit is known while a further seven per cent will seek to keep costs under control by opting for a used car rather than a new one.
Simon Benson, director of motoring services at AA Cars, said the results show it is “clear that the current climate of uncertainty is having a real impact on car buying intentions across the UK”.
“With rising inflation likely to weaken consumer confidence and a first Bank of England rate rise for many years now looking far less remote, many drivers across the UK have quietly started to pull back spending on big-ticket items such as brand new cars,” he added. “Collectively, Brexit fears could hit the British motor industry for £6 billion.”
It is perhaps unsurprising, then, that market leader Ford, which accounted for 13.3 per cent of retail car sales in January, is looking to diversify its business offering by breaking into the consumer savings market.
Ford Money, which according to the company “combines the trusted brand heritage of Ford with the financial expertise of Ford Credit Europe”, this week unveiled six savings products with the aim of giving savers “fair rates, straightforward products and excellent customer service”. Julian Hynd, chief deposits officer at Ford Credit Europe, which until now has existed to provide motor finance to consumers buying Ford vehicles, said the launch would “help savers make their money work harder – now and in the future”.
“Savers are looking for competitive and fair savings products,” he added. “That’s why we created a range of savings products and Isas that are easy to open, simple to manage and secure.”
But just how hard will the new accounts work for consumers? It is certainly correct to say the products are straightforward, with three savings accounts and three cash Isas on offer. Their rates, however, are hardly going to shoot the lights out.
The flexible saver, for example, pays an interest rate of 0.85 per cent while the one-year fixed saver will pay 1.35 per cent and the two-year fixed pays 1.5 per cent. Aside from a 14-day cooling-off period when the accounts are first opened, anyone opening one of the term accounts will have to keep their cash locked up for the full one or two-year period.
The rates on Ford Money’s cash Isas are even lower, at 0.8 per cent on the flexible version and 0.95 per cent and 1.1 per cent respectively on the one and two-year fixes. Interest on savings of up to £20,000 in these products would be tax free, though, as per the government’s Isa rules.
While all these rates are well below the current UK inflation rate of 2.3 per cent, meaning money deposited in them will actually be eroded in real terms, in terms of what is available in the wider market they are among the most competitive.
According to price-comparison site MoneySuperMarket there are currently 288 easy-access savings accounts on offer, the best of which pays a rate of 1.6 per cent, although that is only available to existing customers of Newbury Building Society. At 1.1 per cent the best catch-free rate comes from RCI Bank, which is owned by French car manufacturer the Renault Group, with just 21 accounts in total paying more than the 0.85 per cent Ford Money is offering.
Similarly, of the 68 easy-access cash Isas listed by MoneySuperMarket, 12 pay more than the Ford Money version.
Indeed, so poor is the choice on offer that even Rachel Springall, finance expert at Moneyfacts, said Ford Money “has launched some great deals to consider”.
“Its easy-access account paying 0.85 per cent is highly competitive and heads straight into the Money- facts best buys [list],” she said. “With no restrictions on the number of withdrawals that can be made, this is a great choice for savers looking for a straightforward account.”
But, in the same week, Springall also noted that “savers are likely asking themselves whether it’s still considered saving if they are in fact losing money because of the inflation bite”.
The implication is clear: Ford Money’s rates may not be great, but with little on the market that can keep pace with, never mind beat, inflation, they are currently among the best of a pretty uninspiring bunch.