Is group buying the way forward to cut-price cars?

Consumers warned of the dangers of signing up for a lease contract motor deal. Chiara Cavaglieri reports

Group buying sites are now a common weapon in the armoury of savvy shoppers looking to grab huge discounts on everything from theatre tickets to pottery classes. The concept is simple – the sites secure savings from companies on the proviso they will get bulk orders – but can it stretch to big-ticket items such as cars?

Website CarRush.co.uk, dubbed the Groupon for cars, is promising to take the group-buying model to a new level, using it save you up to 40 per cent on showroom cars.

"CarRush is about limited time, limited quantity deals so if you're in the market for these cars the message is to come and get it," says director and co-founder Mark Peatey.

Buying on the site works in one of two ways. First, you can buy a refundable CarRush coupon for between £99 and £199 to secure one of the deals available. Once financed is approved, the car is delivered to your door complete with a full manufacturer's warranty and servicing available from the local dealer.

Alternatively, if you don't see any cars that take your fancy, CarRush also offers "reverse group buying". Here you can sign up as a member and request a deal for a particular car so that once there is enough interest, they can go to dealers and manufacturers to get a deal.

But all CarRush's deals are Personal Contract Purchases (PCPs). With PCP, the car remains the property of the finance company but you make monthly payments for between two and four years with the right to drive the car (with an agreed annual mileage). At the end of the contract, you can either buy the car outright for a previously agreed total cost (the balloon payment), or arrange to return it with no further liability.

The current Peugeot 107 hatchback deal, for example, is priced at £79 a month, paid back over two years. This requires a £1,600 deposit (20 per cent of the recommended price of £7,995) and at the end of the contract you can either buy the car outright for £2,417.50 or return the vehicle having paid £5,313 in total over the four years. As with other PCPs you are limited to a particular annual mileage (6,000) and charged if you go outside of this, in this case at £0.015 per mile.

"The deals look good but this is a very particular sort of deal, with a particular type of financial arrangement which might not be to everyone's taste," says Chas Hallet, What Car?'s editor in chief.

His warnings are echoed by Paul Harrison, the head of motor finance at the Finance & Leasing Association. "As with anything bought online, use caution, and remember your consumer rights," he says. Not only are you protected under the Consumer Credit Act, but distance selling regulations also mean you have 14 days to cancel and return the goods.

It is also important to do your homework, read the fine print and compare other deals to work out whether CarRush represents good value.

"In my experience people can do a lot worse than going to a dealership and haggling," says Mr Hallet. "Any initiative to save car buyers cash is great, but you should never take anything at face value without really looking at the figures with a forensic eye."