Are the wheels about to fall of car finance?
Discussion
DonkeyApple said:
It's never happened in the history of civilisation. And it never will. It is simply human nature of the crowd to over consume.
This is exactly why all societies have had some form of regulation to prevent the inevitable. From the religious acts against usuary to peer contempt and finally specific regulatory bodies.
But the Governments of the West knowingly began removing these important regulations so as to increase consumer borrowing and therefor spending which leads to faux feelings of wealth and 'happiness' while massively increasing tax incomes to the State and inflating asset values such as properties which then amplifies the feelings of wealth so increases consumption further.
But what everyone on the planet knows is that all excess consumer debt actually achieves is to transfer what little wealth the masses have into the hands of the few. No access to consumer debt and the wealth divide widens as the poor but diligent cannot advance socially. Too much debt and the same.
For 30 years we have suffered a consumer debt spiral and the current knobs in charge are actually the only people since the late 70s to be reigning back access to consumer debt to beneficial levels and forcing the over leveraged to deleverage.
They've forced workers to have pensions as the majority have long preferred to use their income which should have been invested to provide an income once they are de-employed to finance consumption instead. They've deleveraged the housing market and directly attacked the over leveraged speculators to get them out. They are forcing reviews of consumer lending practices from the farce of zero deals and nothing to pay for 6 month scams and now forcing credit cards to tighten up and stop the practice of deliberately encouraging Morlocks into the highly profitable debt default spiral.
Another interesting reason for pulling in the debt consumers is that as rates do rise, each rise is going to be a pay rise for the largest and wealthiest demographic, the cash rich Boomers whose spending power is going to be increasing.
Rising rates will deliver a seismic change to the retail landscape as the consumers of the last 20 years continue to fall away into debt poverty and the non debt consumers see their purchasing power increasing.
The key will be in trying to predict how this changeover will manifest itself in the high streets and among the global retailers. Being able to understand how those with actual money consume goods will be essential in a society which for living memory has focussed on serving consumers who have no money.
The car landscape will be among the most visual change we will see in that changeover. But on the whole it will be an extremely exciting economic period and one full of fantastic opportunities.
As ever DA a very interesting post.This is exactly why all societies have had some form of regulation to prevent the inevitable. From the religious acts against usuary to peer contempt and finally specific regulatory bodies.
But the Governments of the West knowingly began removing these important regulations so as to increase consumer borrowing and therefor spending which leads to faux feelings of wealth and 'happiness' while massively increasing tax incomes to the State and inflating asset values such as properties which then amplifies the feelings of wealth so increases consumption further.
But what everyone on the planet knows is that all excess consumer debt actually achieves is to transfer what little wealth the masses have into the hands of the few. No access to consumer debt and the wealth divide widens as the poor but diligent cannot advance socially. Too much debt and the same.
For 30 years we have suffered a consumer debt spiral and the current knobs in charge are actually the only people since the late 70s to be reigning back access to consumer debt to beneficial levels and forcing the over leveraged to deleverage.
They've forced workers to have pensions as the majority have long preferred to use their income which should have been invested to provide an income once they are de-employed to finance consumption instead. They've deleveraged the housing market and directly attacked the over leveraged speculators to get them out. They are forcing reviews of consumer lending practices from the farce of zero deals and nothing to pay for 6 month scams and now forcing credit cards to tighten up and stop the practice of deliberately encouraging Morlocks into the highly profitable debt default spiral.
Another interesting reason for pulling in the debt consumers is that as rates do rise, each rise is going to be a pay rise for the largest and wealthiest demographic, the cash rich Boomers whose spending power is going to be increasing.
Rising rates will deliver a seismic change to the retail landscape as the consumers of the last 20 years continue to fall away into debt poverty and the non debt consumers see their purchasing power increasing.
The key will be in trying to predict how this changeover will manifest itself in the high streets and among the global retailers. Being able to understand how those with actual money consume goods will be essential in a society which for living memory has focussed on serving consumers who have no money.
The car landscape will be among the most visual change we will see in that changeover. But on the whole it will be an extremely exciting economic period and one full of fantastic opportunities.
I have one question though regarding credit card debt in particular. American Express have just raised my credit limit by another £7k. Between my 3 credit card accounts I now have a credit limit of around half my gross income, roughly two thirds of net income and I'd hazard close to, if not more than all of my disposable income. Obviously if I maxed out these cards I'd be utterly f
ked so why have they done this and more importantly why are they still allowed to do this? In my case it's fine I pay them off every month but a large number of people would see this as an opportunity to go and blow another £7k.
johnwilliams77 said:
jimmy156 said:
There is a difference though.
Person A is spending £800 per month on rent. But has saved a deposit for a house by doing some bangernomics, they take out a mortgage for £250,000 and are now spending around the same £ per month, but on an appreciating asset, not handing it over to a landlord
Person B is spending £800 per month in rent, but instead of saving for a deposit, has taken out a £300 per month PCP on a white Audi A3 (why not get some stereotypes in their.) This is only going to lose them money, but they have a nice car.
These two scenarios are clearly different. In 10 years time, person A could have over 100k in equity in their house, potentially a lot more. Their "borrowing" was an investment and had made them money. Person B Has spend £96,000 on rent, and £36,000 on finance payments, a total of £132,000 that has either gone into someone else pocket, or into financing the depreciation on a new car.
There is no certainty the property will appreciatePerson A is spending £800 per month on rent. But has saved a deposit for a house by doing some bangernomics, they take out a mortgage for £250,000 and are now spending around the same £ per month, but on an appreciating asset, not handing it over to a landlord
Person B is spending £800 per month in rent, but instead of saving for a deposit, has taken out a £300 per month PCP on a white Audi A3 (why not get some stereotypes in their.) This is only going to lose them money, but they have a nice car.
These two scenarios are clearly different. In 10 years time, person A could have over 100k in equity in their house, potentially a lot more. Their "borrowing" was an investment and had made them money. Person B Has spend £96,000 on rent, and £36,000 on finance payments, a total of £132,000 that has either gone into someone else pocket, or into financing the depreciation on a new car.
They are taking on a tonne of interest and paying it to a bank instead of cash to a landlord
Large buying fees and selling hassle
djc206 said:
As ever DA a very interesting post.
I have one question though regarding credit card debt in particular. American Express have just raised my credit limit by another £7k. Between my 3 credit card accounts I now have a credit limit of around half my gross income, roughly two thirds of net income and I'd hazard close to, if not more than all of my disposable income. Obviously if I maxed out these cards I'd be utterly fked so why have they done this and more importantly why are they still allowed to do this?
In my case it's fine I pay them off every month but a large number of people would see this as an opportunity to go and blow another £7k.
They've done it to encourage you to put more of the flow from your other cards through them. I have one question though regarding credit card debt in particular. American Express have just raised my credit limit by another £7k. Between my 3 credit card accounts I now have a credit limit of around half my gross income, roughly two thirds of net income and I'd hazard close to, if not more than all of my disposable income. Obviously if I maxed out these cards I'd be utterly f
ked so why have they done this and more importantly why are they still allowed to do this? In my case it's fine I pay them off every month but a large number of people would see this as an opportunity to go and blow another £7k.
There is a suitability trade-off that on one side the argument is that they are enticing you to spend more and increase your debt but on the other side they will argue that your credit score shows you are sensible and that you have business with competitors that they want to win.
Megaflow said:
Not in the short term, possibly even medium term, but in the long term property will always appreciate. Not necessarily for the property, but for the land. They don't make land anymore, more people chasing the same amount of a commodity will always drive the price up.
Assuming either a growth in population or a growth in money supply. 
. Both of which are highly questionable in the UK at this exact moment in time. Detroit may not be the only modern city to die. In fact, it obviously won't be. It's just the first.
Megaflow said:
Not in the short term, possibly even medium term, but in the long term property will always appreciate. Not necessarily for the property, but for the land. They don't make land anymore, more people chasing the same amount of a commodity will always drive the price up.
What is long term to you?RSK21 said:
Except of course in some rare cases it can be as there is no alternative better cash price and therefore it's just the same margin derived differently.
Yup. And that's when you are at the late stage of the cycle of excessive consumer debt when the profit from the finance is more essential to the vendor than the margin on the product. The byproduct of which is that non finance buyers are forced to pay as much as those also buying a finance deal as well as a product. We have certainly reached this inversion point in the car market and everyone is now having to over pay for goods regardless of their purchasing power. But even so, the bulk of consumers will still be steered by basic, headline marketing statements and not be sitting down with a pen and paper and calculating fair values. £30/week will always be cheaper to most people than £100/month.
alock said:
Bill said:
Not really.
PCP/lease is the housing equivalent of renting the biggest, flashest pad you can "afford".
Leasing a new Panda for £100/month to get you to and from work everyday is the equivalent of a rail/bus season ticket. Everything else is shades of grey, and just a choice of how each individual prioritises different benefits.PCP/lease is the housing equivalent of renting the biggest, flashest pad you can "afford".
Thats exactly it. All this talk about PCP / PCH deals and people supposedly only doing so to impress the neighbours, etc, etc and the reality is that most of the stuff sold this way are Clios, Fiestas and Astras because its hassle free and relatively affordable motoring for people to get about.
daemon said:
+1
Thats exactly it. All this talk about PCP / PCH deals and people supposedly only doing so to impress the neighbours, etc, etc and the reality is that most of the stuff sold this way are Clios, Fiestas and Astras because its hassle free and relatively affordable motoring for people to get about.
True but don't forget that within that bulk group you have the vital activity of upselling of features/spec which have absolutely massive finance profits. Thats exactly it. All this talk about PCP / PCH deals and people supposedly only doing so to impress the neighbours, etc, etc and the reality is that most of the stuff sold this way are Clios, Fiestas and Astras because its hassle free and relatively affordable motoring for people to get about.
One thing for sure is that while the UK does have a considerable consumer debt problem which most visibly manifests itself in goods like cars, we are nowhere near the parlous state of the consumer in the US.
alock said:
Bill said:
Not really.
PCP/lease is the housing equivalent of renting the biggest, flashest pad you can "afford".
Leasing a new Panda for £100/month to get you to and from work everyday is the equivalent of a rail/bus season ticket. Everything else is shades of grey, and just a choice of how each individual prioritises different benefits.PCP/lease is the housing equivalent of renting the biggest, flashest pad you can "afford".
I've had 13 used cars over the last 15 years, all paid in cash that I could comfortably afford. Unfortunately, despite my best efforts, I seem to have a bad habit of picking heaps of s
t and always spend far too much money keeping them going (or lose hugely selling them with faults).I have friends who have always had cheap cars and never needed to spend anything on them - but I'm not that fortunate.
My last car was on PCP - nearly new, warranty, fab condition, perfectly suited to my needs and a much nicer/posher car than I was used to - twice what I could have afforded in cash... But in the time I had it, I didn't spend a penny on it.
Thanks to a large dealer contribution for using their PCP package I actually sold it for a profit after a year.
Current car is leased - brand new, over three times what I could afford in cash, but thanks to the low tax and modern engine I'm actually paying less overall (50mpg compared to 28 for my last owned car - and I do a high mileage).
Of course some people will spend every penny they can on monthly payments for something unnecessary - but PCP/lease definitely can make sense.
DonkeyApple said:
daemon said:
+1
Thats exactly it. All this talk about PCP / PCH deals and people supposedly only doing so to impress the neighbours, etc, etc and the reality is that most of the stuff sold this way are Clios, Fiestas and Astras because its hassle free and relatively affordable motoring for people to get about.
True but don't forget that within that bulk group you have the vital activity of upselling of features/spec which have absolutely massive finance profits. Thats exactly it. All this talk about PCP / PCH deals and people supposedly only doing so to impress the neighbours, etc, etc and the reality is that most of the stuff sold this way are Clios, Fiestas and Astras because its hassle free and relatively affordable motoring for people to get about.
One thing for sure is that while the UK does have a considerable consumer debt problem which most visibly manifests itself in goods like cars, we are nowhere near the parlous state of the consumer in the US.
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