Are the wheels about to fall of car finance?
Discussion
After reading this thread I get the idea that the car industry is corrupt. They are misselling finance products and controlling used stock to artificially inflate prices.
Doesn't this mean that anyone who involves themselves with any transaction via a main dealer or broker is just adding to the problem?
All these stories of 'I use PCP, but I know what I'm in for' are just examples of more money being handed over to manufacturers.
I think it's a bit rich that there is so much negativity on here. So many pompous comments about people getting themselves into debt when they shouldn't be etc. Yet, even people supposedly in the know on here are contributing to the rot.
Doesn't this mean that anyone who involves themselves with any transaction via a main dealer or broker is just adding to the problem?
All these stories of 'I use PCP, but I know what I'm in for' are just examples of more money being handed over to manufacturers.
I think it's a bit rich that there is so much negativity on here. So many pompous comments about people getting themselves into debt when they shouldn't be etc. Yet, even people supposedly in the know on here are contributing to the rot.
SirSamuelBuca said:
regardless of peoples opinions. it will never fall through. our banking system is based on debt etc etc bla bla so ye 
As I mentioned earlier in the thread. I saw a news report last year about how the government etc. love finance and credit. It's apparently their chosen way of driving the economy.I can't see much changing anytime soon.
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
My 20 year old son was on the verge of leasing, thing is he is an Airline tech apprentice, earns maybe £800 a month so we gave him oney to get a car, with all his other money (21st money early) he got an Astra SRi which looks the parts, seems to be tough and has not cost him much, when he is qualiied, then that is the time he can go for something better.£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
Surely with insurance, fuel etc on a grand a month at that age all he can do is run a car if leasing ?
RDMcG said:
In the US the wheels are really coming off. Shares of Hertz have tumbled and Ford also. There is too much sub prime borrowing and used car prices are dropping very quickly. I think this will be quite a big story in the coming months.
Indeed. See this linkhttps://www.bloomberg.com/news/articles/2017-03-27...
The issue to me separates into the micro based decisions of each consumer and the economic macro picture. The former interests me not in the slightest, the latter hugely so. Notwithstanding, we need to understand the decisions of Johny Spacktard and what lies behind his £700 quid a month white range rover sport on his drive in order to fully appreciate and inform our view of the latter.
Looking at the US situation, it could be a canary in a coalmine. Thus, as the esteemed Donkey Apple has pointed out (on an aside, a fine username and those who haven't should look up its meaning in the urban dictionary), we need to understand whether the US situation could be replicated here.
One key aspect is that the weakening and potential collapse of the used car market in the US (collapse is somewhat dramatic but I use for artistic purposes) must be viewed in the context of the wider US economic landscape. And they key event(s) here are that the US Fed under Yellen has raised interest rates 2 times in 3 months with at least one more anticipated in 2017. Thus US finance just got more expensive. Only by 0.5% but the butterfly effect is evident. Ergo, and with no prizes for pointing out the bleedin' obvious, credit has just got more expensive. Some might say 0.5% is not a big deal, the markets believe otherwise.
Back to Albion, and whilst UK rate rises seem unlikely whilst Brexit remains ongoing, inflation will ultimately dictate this and at some point they will rise, it is inevitable.
Thus, much like the old adage that British Airways (IAG in new money) is a pension fund that flies aeroplanes, if we start to view the car manufacturers as finance companies whose stock in trade is vehicles, interest rate rises will curtail the affordability of that finance and thus they will push less 'product'.
Back to Johny then. As long as he can afford his monthlies and interest rates stay low then the party will continue, just. But if he loses his job, or interest rates rise, then his next car won't be a RR sport, it will be something cheaper. And his 3 year old RRS will be worth a lot less. And when you're a finance company who owns tens of thousands of the things, that is a problem.
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
His insurance will be astronomical? So how does he eat and pay his way...£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
(We know ..The answer).
At a local illegal car meet I met a fair few stroppy youths in new fairly decent cars. Makes me wonder how many of their parents are funding their purchases...
J4CKO said:
Surely with insurance, fuel etc on a grand a month at that age all he can do is run a car if leasing ?
It must be costing him at least 50% of his take homeBut he has no desire to move out and get his own place, his life is go to work, go out with his mates at the weekend and drive a nice car.
Wouldn't surprise me if when the lease expires, he is earning £200 per month more, he decides to go for a £500+ pm car lease next time.
Sa Calobra said:
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
His insurance will be astronomical? So how does he eat and pay his way...£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
(We know ..The answer).
At a local illegal car meet I met a fair few stroppy youths in new fairly decent cars. Makes me wonder how many of their parents are funding their purchases...
Remember some girl in our office, looking for her first car, suggested some secondhand ones at 2 or thereabouts, nose was turned up, turns up in a brand new Mini, an eight year old Clio just wont do when you have ascended to the dizzy heights of 17 grand a year
We do tend to, as a species be narcissistic, needy, greedy and lazy, so a way to have something nice we couldn't otherwise have is very compelling. I am not immune to this, just my innate tightness kicks in first.
powerstroke said:
Yipper said:
The FT article is just a rehash of a Guardian article that has been rehashed every year or two since about 2011...
For sure, the PCP upcycle will end at some point. UK new car sales will decline this year, so 2017 may well be the start of the end (until the next cycle).
One thing is certain -- the vast majority of UK consumers on PCP and lease deals must be getting royally ripped off. Like, absolutely wallet-raped. Because when I check all the PCP and lease deals online and in showrooms, ~98% of them are overpriced and absolutely rubbish. If 70-80% of buyers are PCPing and leasing, that is a million people getting screwed over by dealers and manufacturers every year...
No , if they are too stupid to put the monthly payment amount x number of payments plus any doc fees in to a calculator so as to work out how much they will be paying to For sure, the PCP upcycle will end at some point. UK new car sales will decline this year, so 2017 may well be the start of the end (until the next cycle).
One thing is certain -- the vast majority of UK consumers on PCP and lease deals must be getting royally ripped off. Like, absolutely wallet-raped. Because when I check all the PCP and lease deals online and in showrooms, ~98% of them are overpriced and absolutely rubbish. If 70-80% of buyers are PCPing and leasing, that is a million people getting screwed over by dealers and manufacturers every year...
RENT a car then tough luck,go forth and multiply ....
Edited by powerstroke on Sunday 26th March 08:04
I lease my Fiesta but wanted only a deal where it was 1+23, I am approx. £150/month for a 140 st-line to rent it for 24 months. There was a £300 admin fee, that's approx. £3,900 over the term or just short of £2K per year for a brand new warm hatch which all things considered isn't bad.
I think there is plenty of people that know exactly what they are doing but yes there are some that haven't got a clue, and that is scary!
The other side of this is what happens to the colossal amount of cars that litter the decommissioned air-bases and racetracks up and down the land that are the by-product of this finance insanity. They can't sell them on without battering the residuals that hold up the deals. Yet they have a wildly inflated asset value on somebody's books.
GTIAlex said:
I pay 211 for a Fiesta St-3, each month. On a 2 year PCP with no deposit.
I knew when signing up for such a "cheap" monthly, I was committing to the full 2 years and hand back at the end.
People get really shafted when they think they can go for the lowest monthlies and swap whenever they like.
I think its because the majority of people are morons and are easily parted with their money.
And yes Il have nothing to show after 2 years but 211x24=5,064 and difn't fancy driving around in a 150,000mile+ golf gti etc
You make your choice, pay your monies and thats that but you have to be sensible about it, which most people are not.
£211 for an ST-3 Fiesta with ZERO deposit on a 24 month PCP, no chance I knew when signing up for such a "cheap" monthly, I was committing to the full 2 years and hand back at the end.
People get really shafted when they think they can go for the lowest monthlies and swap whenever they like.
I think its because the majority of people are morons and are easily parted with their money.
And yes Il have nothing to show after 2 years but 211x24=5,064 and difn't fancy driving around in a 150,000mile+ golf gti etc
You make your choice, pay your monies and thats that but you have to be sensible about it, which most people are not.
Even with a mileage limit of 5K miles per year that's impossible. Having financed an ST3 Fiesta back in 2014 over 24 months (albeit with a small deposit) and a 20K mile per year mileage limit, I was roughly £150 a month more than that. Checking a broker for reference right now, an ST3 with £0 deposit over 24months PCP & 10K miles per annum (couldn't chose less) is still £360pcm.
Either you haven't a clue and it's actually some amazing lease deal or your talking BS.
And please note, with a PCP deal, you would only hand the car back at the end if you were in negative equity, so again, spouting rubbish.
wemorgan said:
Derek Smith said:
I've considered bangernomics, but I've had that for most of my life. The thread has convinced me to go for a classic, around £6k, keeping the balance for repairs.
In the past I've come to similar conclusions. I tried a VX220 for £8k (modern classic perhaps?) and a 944 S2 for £5k. Both enjoyable in their own ways.I'm tempted to go back again to this once my current lease car ends.
Good luck with your classic car.
- think I'll start a thread on this.....
Regarding those who criticise those who have taken out various types of loans on cars for not taking enough care in their choice, I would point out that I'm not unintelligent and went to a couple of car showrooms to chat to sales staff about the positives and negatives of each. I was fed rubbish but it took some time to work out where the outright bull was. On the other hand I went to Mercedes-Benz World and spoke with one of their staff and got a lot of info which appeared as unbiased as one could hope a sales person to be. It is difficult to judge the pros and cons if, like me, you have little grounding in finance and haven't bought much on credit.
These offers do look good.
W124 said:
The other side of this is what happens to the colossal amount of cars that litter the decommissioned air-bases and racetracks up and down the land that are the by-product of this finance insanity. They can't sell them on without battering the residuals that hold up the deals. Yet they have a wildly inflated asset value on somebody's books.
I'd be interested to know what happens to these. Special editions?Do they get steadily fed back into the market at an inflated used price to keep the new car scam going?
This is why I cannot take anyone in power who talks about recycling and sustainability seriously. It's an absolute joke.
W124 said:
The other side of this is what happens to the colossal amount of cars that litter the decommissioned air-bases and racetracks up and down the land that are the by-product of this finance insanity. They can't sell them on without battering the residuals that hold up the deals. Yet they have a wildly inflated asset value on somebody's books.
You mean the evidence of market manipulation by manufacturers and their finance arms? They will probably be booked into SPVs in somewhere like Lux and the book losses used to offset tax liabilities somewhere else. J4CKO said:
Sa Calobra said:
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
His insurance will be astronomical? So how does he eat and pay his way...£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
"He can afford it"
I am very pro-lease for my circumstances, but the above shows how things have changed, at his age I probably earned a little bit more than him, but drove around in a £1k Ford Cortina.
The other thing is at the end of the 24 months, what does he do? Start again I assume, doesn't want to lose face with his mates or get something lesser. So he will lease for years and years.
(We know ..The answer).
At a local illegal car meet I met a fair few stroppy youths in new fairly decent cars. Makes me wonder how many of their parents are funding their purchases...
Remember some girl in our office, looking for her first car, suggested some secondhand ones at 2 or thereabouts, nose was turned up, turns up in a brand new Mini, an eight year old Clio just wont do when you have ascended to the dizzy heights of 17 grand a year
We do tend to, as a species be narcissistic, needy, greedy and lazy, so a way to have something nice we couldn't otherwise have is very compelling. I am not immune to this, just my innate tightness kicks in first.
They aren't all narcissistic and "look at me", having said that my eldest can be and was recently looking at a car that was out way out of her price range and she always goes on about when she is sorted she is going to get a white 1 series on finance.
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
Something's wrong there - a 20yr old on minimum wage isn't taking home £1K/mth.£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
Sheepshanks said:
MOBB said:
My 20 year old nephew liked my leased Leon Cupra so much, he went and leased one as well.
£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
Something's wrong there - a 20yr old on minimum wage isn't taking home £1K/mth.£320 per month, which he "can afford".
He's on minimum wage, lives with his parents and takes home less than £1k a month I believe.
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