Are the wheels about to fall of car finance?
Discussion
DonkeyApple said:
Baz Tench said:
It. just puts me off the whole borrowing treadmill for the time being, but on the other hand, this is probably the best time to borrow if you shop around.
Just a little crossroads for me personally.
Perversely, the best time to borrow can be when rates are high because values are depressed. Just a little crossroads for me personally.
Surely cost of a high interest loan will more than offset any potential depression in value?
SWoll said:
Swings and roundabouts I'd have thought DA? Especially when you're talking about used car values as they seem to be all over the place at present.
Definitely. In a perfect market you'd expect values to fall as costs of purchase rose so that the rate is almost irrelevant but obviously no market is anywhere near perfect, especially this one where the value of the first 2-5 years of the car's life is so strongly manipulated. But we do know that consumers shopping with debt do so by monthly amounts so as rates eventually rise the value of what they can buy will fall which will initially be catered for by buying lower value products but it will put pressure on absolute values. But then you might see demand for used premium cars rise and you'd certainly expect their future supply to fall so it's very hard to say what's going to happen other than that the landscape we currently have is going to change dramatically.
48k said:
neil1jnr said:
48k said:
neil1jnr said:
And please note, with a PCP deal, you would only hand the car back at the end if you were in negative equity,
That's not strictly true is it. If you broke even or in positive equity you would trade it in or sell it, unless you didn't want another car/hassle and didn't mind losing the equity.
Elysium said:
This is a flawed view. If you want to understand the implications of the loan plug the details in here:
http://www.thecalculatorsite.com/finance/calculato...
If you complete the term and pay the final value, you will have paid around £29k for the car, which includes £3.5k for interest.
The GMFV is usually 80% of the trade in value so at that point it will be worth around £12.5k. So the cost to own will be £ £16,500. That is £4,125 per year and if you bought cash you could have saved £875 a year.
The big point is that you should ALWAYS buy the car. Either at the end of the term or early as the settlement value will usually be more than it is worth. Handing back the car after 4 years or early is more expensive for the buyer. The earlier you pay of the loan, the more interest you save.
I generally take a 4 year PCP with as big a deposit as I can get away with and pay off in full after 2-3 years. I always own the car at that point.
The idea that PCP leads to you not buying the car is a myth. You should never ever look at it that way.
I do similar, seeing a PCP as a way of providing flexibility that leaves money in the bank but avoids the big monthlies of HP. http://www.thecalculatorsite.com/finance/calculato...
If you complete the term and pay the final value, you will have paid around £29k for the car, which includes £3.5k for interest.
The GMFV is usually 80% of the trade in value so at that point it will be worth around £12.5k. So the cost to own will be £ £16,500. That is £4,125 per year and if you bought cash you could have saved £875 a year.
The big point is that you should ALWAYS buy the car. Either at the end of the term or early as the settlement value will usually be more than it is worth. Handing back the car after 4 years or early is more expensive for the buyer. The earlier you pay of the loan, the more interest you save.
I generally take a 4 year PCP with as big a deposit as I can get away with and pay off in full after 2-3 years. I always own the car at that point.
The idea that PCP leads to you not buying the car is a myth. You should never ever look at it that way.
My first 3-yr PCP - paid off after 2.5 years, traded the car after a further year, into...
My second 3-yr PCP - paid off at term, kept the car for a further 3.5 years, sold privately and added funds to deposit for...
My third 3-yr PCP, fully intend to clear at term and keep the car for another few years.
Those are my cars, also PCP'd a car for the wife, which was paid off at term and which we have kept a further year and will do so for longer...
Using a PCP as a substitute for a lease is less sensible, but they can work well as alternatives to HP or cash. I've kept the same monthly car budget for 11 years, just adjusting the deposits for each deal and making sure that plans are in place for clearing at term.
I'm considered a youngster, being 19, and I'm looking to buy my first proper car. I have a very healthy inheritance coming and a little savings myself. Now my sister is in roughly the same situation as me, but is on £15k a year whereas I'm still at uni. Now she's looking to go into Financing a brand new Audi A1 or A class for a few hundred a month plus the initial deposit, whereas I'm looking at blowing around £7k (insurance included) on a 10 year old top spec A3. She was very shocked at what £5k cash could get you but her words were "but I want a new car, I want an A class" now I brought my laptop outright (a very decent and up to date laptop for £700) whereas she wanted the new macbook but couldn't afford to buy outright so her laptop is on finance as well as her phone, sofa and tv. We've spoken to her about debt and living a lifestyle she can afford, but she seems to like the fact if getting a new car every 3 years and can't grasp that she owes thousands already (not including student loans). I couldn't live like that but there's no right or wrong way of living, they'll learn eventually that debt is bad but that's not for me. I'd rather buy my phone, laptop etc outright and not have the worry of £££ bills extra every month and I've always got assets to sell if my life goes tits up and a change in lifestyle is needed. Makes more sense to me
HedgeyGedgey said:
I'm considered a youngster, being 19, and I'm looking to buy my first proper car. I have a very healthy inheritance coming and a little savings myself. Now my sister is in roughly the same situation as me, but is on £15k a year whereas I'm still at uni. Now she's looking to go into Financing a brand new Audi A1 or A class for a few hundred a month plus the initial deposit, whereas I'm looking at blowing around £7k (insurance included) on a 10 year old top spec A3. She was very shocked at what £5k cash could get you but her words were "but I want a new car, I want an A class" now I brought my laptop outright (a very decent and up to date laptop for £700) whereas she wanted the new macbook but couldn't afford to buy outright so her laptop is on finance as well as her phone, sofa and tv. We've spoken to her about debt and living a lifestyle she can afford, but she seems to like the fact if getting a new car every 3 years and can't grasp that she owes thousands already (not including student loans). I couldn't live like that but there's no right or wrong way of living, they'll learn eventually that debt is bad but that's not for me. I'd rather buy my phone, laptop etc outright and not have the worry of £££ bills extra every month and I've always got assets to sell if my life goes tits up and a change in lifestyle is needed. Makes more sense to me
Just out of interest, and it isnt a criticism, but how come you say brought instead of bought ? see this everywhere, is it taught in school, I always thought bought meant purchased and brought means you have something with you ?J4CKO said:
Just out of interest, and it isnt a criticism, but how come you say brought instead of bought ? see this everywhere, is it taught in school, I always thought bought meant purchased and brought means you have something with you ?
I actually hate bad grammar, the wrong "too" when saying too much is the one that winds me up the most. What you see in my post was predictive text when I'm rushing a post as I'm in a uni lecture at the moment haha
MoelyCrio said:
CharlesdeGaulle said:
4941cc said:
Lots of sensible stuff
Great post. I know somebody who has a Merc SUV on PCP but who has to pay for the insurance monthly. She wasnt in any way embarrassed about admitting it either. She thought everybody did it.
I took out a Peugeot PCP in 1994, I think it was called 'Passport'. Never again. I only had to experience it once. I've bought cars outright ever since.
Maybe schools need to get with the times and start teaching kids life skills. Starting with: "Living beyond your means doesn't impress the girls".
It's already started to happen in the US.
Talk of "deep sub prime" car loans defaulting in large numbers bundled in with other loans.
http://jalopnik.com/deep-subprime-loans-skyrocket-...
Now where have I seen this before?
So in short, dump your shares in any organisation involved with car financing and sign up for a cheap lease now as this time next year it'll be a very different market!
Talk of "deep sub prime" car loans defaulting in large numbers bundled in with other loans.
http://jalopnik.com/deep-subprime-loans-skyrocket-...
Now where have I seen this before?
So in short, dump your shares in any organisation involved with car financing and sign up for a cheap lease now as this time next year it'll be a very different market!
djc206 said:
Mush1 said:
I mean I live pretty close to central London and I don't see many people wearing 5k watches. I'm yet to find many places within zones 1 to 3 of London that sell pints for much less than £4.50 even in the dives.
London is it's own world. Look harder you'll see the watches, usually paired with a blue suit and pointy brown shoes.
aspirated said:
Sounds like your sister is on a slippery slope...and she won't be paying off any student loan until she earns over 21k
As for your car, in your position I'd rather spend it on something much less likely to depreciate, like an E46 M3 or Integra Type R
Yeh she doesn't quite understand the value of money yet. Tbh (don't laugh) I'm gonna buy a Vauxhall nova gte and store it away, or a Cavalier Turbo and do the same. I can guarantee the values will increase significantly soonAs for your car, in your position I'd rather spend it on something much less likely to depreciate, like an E46 M3 or Integra Type R
FN2TypeR said:
No, you can't.
Yes I can, the c20let engine has run out for people to put in other cars, hence the Saab b204 engine being transplanted into vauxhalls lately. Anything surviving with the c20let engine in originally is worth a significant amount. There's a calibra turbo for sale at the mo on eBay for £7k where 5 years ago the same was practically worthless and pulled apart for its engine and gearbox. Then a Nova, a clean and original 3 door nova is shooting up in value, I've been watching them. We got offered a nova sport shell and all the bits for £1k 3 years ago and turned it down. Now a rusty sport that needs to be reshelled into another nova is worth upwards of £10k (dad got offered one 6 months back) so that's literally just the VIN and V5 that's worth that amount, so I'd say my words are pretty safe 
HedgeyGedgey said:
I'm considered a youngster, being 19, and I'm looking to buy my first proper car. I have a very healthy inheritance coming and a little savings myself. Now my sister is in roughly the same situation as me, but is on £15k a year whereas I'm still at uni. Now she's looking to go into Financing a brand new Audi A1 or A class for a few hundred a month plus the initial deposit, whereas I'm looking at blowing around £7k (insurance included) on a 10 year old top spec A3. She was very shocked at what £5k cash could get you but her words were "but I want a new car, I want an A class" now I brought my laptop outright (a very decent and up to date laptop for £700) whereas she wanted the new macbook but couldn't afford to buy outright so her laptop is on finance as well as her phone, sofa and tv. We've spoken to her about debt and living a lifestyle she can afford, but she seems to like the fact if getting a new car every 3 years and can't grasp that she owes thousands already (not including student loans). I couldn't live like that but there's no right or wrong way of living, they'll learn eventually that debt is bad but that's not for me. I'd rather buy my phone, laptop etc outright and not have the worry of £££ bills extra every month and I've always got assets to sell if my life goes tits up and a change in lifestyle is needed. Makes more sense to me
Try to use paragraphs - sorry to sound like an arse but a wall of text is hard to read.HedgeyGedgey said:
J4CKO said:
Just out of interest, and it isnt a criticism, but how come you say brought instead of bought ? see this everywhere, is it taught in school, I always thought bought meant purchased and brought means you have something with you ?
I actually hate bad grammar, the wrong "too" when saying too much is the one that winds me up the most. What you see in my post was predictive text when I'm rushing a post as I'm in a uni lecture at the moment hahaHedgeyGedgey said:
FN2TypeR said:
No, you can't.
Yes I can, the c20let engine has run out for people to put in other cars, hence the Saab b204 engine being transplanted into vauxhalls lately. Anything surviving with the c20let engine in originally is worth a significant amount. There's a calibra turbo for sale at the mo on eBay for £7k where 5 years ago the same was practically worthless and pulled apart for its engine and gearbox. Then a Nova, a clean and original 3 door nova is shooting up in value, I've been watching them. We got offered a nova sport shell and all the bits for £1k 3 years ago and turned it down. Now a rusty sport that needs to be reshelled into another nova is worth upwards of £10k (dad got offered one 6 months back) so that's literally just the VIN and V5 that's worth that amount, so I'd say my words are pretty safe FN2TypeR said:
If you think that's a fool proof way to constantly outstrip inflation and ownership costs then best of luck to you.
The rarity of the surviving originals has nothing to do with inflation?!?! As I said dry store it away no ownership costs will be apparent as it'll be in storage. And in 5-7years take it out of storage and you have a very sought after car worth more than the original investmentGassing Station | General Gassing | Top of Page | What's New | My Stuff