Weak Sterling effect on UK Porsche values?

Weak Sterling effect on UK Porsche values?

Author
Discussion

mollytherocker

Original Poster:

14,365 posts

208 months

Saturday 15th October 2016
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The pound is of course weakening against the Dollar and Euro. I would expect this to continue and worsen in the short to medium term, although that is another thread!

I guess this makes UK Porsches cheaper to those US and European markets? Could this bolster UK values of 'special' cars? I realise it will have no effect of the cheaper end of the market.

Cheib

23,113 posts

174 months

Saturday 15th October 2016
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I dont see sterling rallying until Markets have much more certainty of what Brexit means. That's at least a year away,..probably more. Most car makers have FX hedges for a year or so.

Porsche prices will be going up at some stage in the next year or so...by quite a lot. That's not really going to impact the older cars but it will slow the depreciation of current models. It's making me think about buying a Cayenne.

supersport

4,040 posts

226 months

Saturday 15th October 2016
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Just checked the garage, still worth the world to me biglaugh

mollytherocker

Original Poster:

14,365 posts

208 months

Saturday 15th October 2016
quotequote all
Cheib said:
I dont see sterling rallying until Markets have much more certainty of what Brexit means. That's at least a year away,..probably more. Most car makers have FX hedges for a year or so.

Porsche prices will be going up at some stage in the next year or so...by quite a lot. That's not really going to impact the older cars but it will slow the depreciation of current models. It's making me think about buying a Cayenne.
I hadn't considered that, new prices will certainly increase! Porsche are not going to take a 15% bath are they?

A nearly new GT4 is looking like a very smart buy right now!

hornbaek

3,670 posts

234 months

Sunday 16th October 2016
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LHD at STG prices looks like a smart buy before they all go to the Continent

dmm1983

63 posts

125 months

Sunday 16th October 2016
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Weak sterling should prop the used car market up and new generation cars may well cost more as discussed above. The limiting factor is an eventual rise in interest rates due to inflation which might cause people to sell cars bought on finance which will then put pressure on used car prices. When that happens is anyone's guess. Would imagine any significant negative Brexit headlines (like definitive no on passporting of financial services) will see cars being sold more aggressively, like in 2008 during the financial crisis. Interesting to note GBPEUR rate is not dissimilar to 2008 at the moment.

RSVP911

8,192 posts

132 months

Sunday 16th October 2016
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dmm1983 said:
Weak sterling should prop the used car market up and new generation cars may well cost more as discussed above. The limiting factor is an eventual rise in interest rates due to inflation which might cause people to sell cars bought on finance which will then put pressure on used car prices. When that happens is anyone's guess. Would imagine any significant negative Brexit headlines (like definitive no on passporting of financial services) will see cars being sold more aggressively, like in 2008 during the financial crisis. Interesting to note GBPEUR rate is not dissimilar to 2008 at the moment.
Some interesting points . I struggle with interest rate hikes driven by currency driven inflation. Increased prices on imported goods and raw materials driven by the weaker £ is nothing to do with consumption getting out of control , so why would this lead to a raising of interest rates - genuine question ; I've been mulling this over for days ?? smile

Phooey

12,575 posts

168 months

Sunday 16th October 2016
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As Cheib says - I can see Porsche eventually (2018 I would guess) putting prices up to reflect currencies, or allocating less cars to the UK. In the short term that could mean used cars stay strong, but if we cause ourselves a recession then the opposite could happen. It's definitely going to be interesting, bit like a mixed weather forecast - It's going to be a dry day with a chance of rain.

RSVP911

8,192 posts

132 months

Sunday 16th October 2016
quotequote all
Phooey said:
As Cheib says - I can see Porsche eventually (2018 I would guess) putting prices up to reflect currencies, or allocating less cars to the UK. In the short term that could mean used cars stay strong, but if we cause ourselves a recession then the opposite could happen. It's definitely going to be interesting, bit like a mixed weather forecast - It's going to be a dry day with a chance of rain.
When you say "if" , I'm not sure what you mean - I think the word you were looking for is "when" smile

ooid

4,049 posts

99 months

Sunday 16th October 2016
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dmm1983 said:
Would imagine any significant negative Brexit headlines (like definitive no on passporting of financial services) will see cars being sold more aggressively, like in 2008 during the financial crisis. Interesting to note GBPEUR rate is not dissimilar to 2008 at the moment.
See even that happens, I believe most people in the city buy on finance, -and I do not think they would start sending people off to their countries- so I guess they might leave the car once their option or lease duration expires. Not sure how much they would worth in the market then?

I do not know if we would ever see those "abandoned super cars in Dubai!" pictures and headlines again, just like post-2008?

dmm1983

63 posts

125 months

Sunday 16th October 2016
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I too am trying to get my head around all the ins and outs of the current environment and I have no idea what to make of it. I am generally very debt adverse, but I can see why so many have leveraged up on houses and taken out cheap car finance. My main concern/interest is what will happen to property prices and I think this will also have an implicit effect on used car pricing. Everyone needs a roof over their head, but they do not need a prestige car. I would imagine in tough times or periods of severe incertainty, the car would be towards the top of the priority list to get rid of in order to service a mortgage / rent and to place more equity in the house / put a few pounds in the savings account. So if unemployment starts to notch up in the better paid sectors, I would be concerned about used prices and imagine as would dealers and it's easy to see a situation where prices start to circle lower.

I'm not sure a weak sterling argument works for foreign buyers of used cars like it does in property, as it would need to be an exclusive RHD car to warrant a foreign buyer wanted to stump up the cash for the purchase. I struggle to see where the incremental demand through confidence comes from to justify the maintenance of such strong domestic used car market. Pre Brexit with cheap financing I could just about see how the top end car market was blooming, the current climate, not so much.

ooid

4,049 posts

99 months

Sunday 16th October 2016
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It is a lot to do with employment as well. The cheap debt is fine as long as people's employment is guaranteed. Unlike 2008, many lost their jobs so there was no point in getting a cheap debt really. By cutting interest rates this summer, they wanted to keep loads of jobs in the shorter term but of course we do not know the future now.

I have seen first hand in 2008, in construction industry, many big prestigious projects have been cancelled in my previous firm. People/clients used to come in with private jets to meetings and etc, just disappeared overnight and lost millions. Of course it is a very different environment today, and Porsche will keep making good/niche cars but I think there will be definitely some adjustment on mainstream models. (mainly on used market imho)

Cheib

23,113 posts

174 months

Monday 17th October 2016
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RSVP911 said:
Phooey said:
As Cheib says - I can see Porsche eventually (2018 I would guess) putting prices up to reflect currencies, or allocating less cars to the UK. In the short term that could mean used cars stay strong, but if we cause ourselves a recession then the opposite could happen. It's definitely going to be interesting, bit like a mixed weather forecast - It's going to be a dry day with a chance of rain.
When you say "if" , I'm not sure what you mean - I think the word you were looking for is "when" smile
It's definitely a "when" in my book! Can't see how it will be any other way. Porsche are slightly better positioned as they have much higher margins to absorb some of the FX move but the likes of BMW and Audi don't so if they're increasing prices Porsche will.

Adam B

27,142 posts

253 months

Monday 17th October 2016
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RSVP911 said:
Some interesting points . I struggle with interest rate hikes driven by currency driven inflation. Increased prices on imported goods and raw materials driven by the weaker £ is nothing to do with consumption getting out of control , so why would this lead to a raising of interest rates - genuine question ; I've been mulling this over for days ?? smile
Because the BoE has a 2% inflation target, and if it goes over that it is supposed to use monetary policy (mainly IR) to dampen demand. That said it has flexibility:

http://www.cnbc.com/2016/10/17/reuters-america-boe...

nickfrog

20,874 posts

216 months

Monday 17th October 2016
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Phooey said:
I can see Porsche eventually (2018 I would guess) putting prices up to reflect currencies
January 17 is my guess.

RSVP911

8,192 posts

132 months

Monday 17th October 2016
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Adam B said:
Because the BoE has a 2% inflation target, and if it goes over that it is supposed to use monetary policy (mainly IR) to dampen demand. That said it has flexibility:

http://www.cnbc.com/2016/10/17/reuters-america-boe...
Thanks , I understand the point re the target , but if inflation is not consumption driven then what's the point of putting up interest rates as all this will do is drive down what little consumption is left - looks like this is what the artical says too - it's going to get very messy ! smile

Adam B

27,142 posts

253 months

Monday 17th October 2016
quotequote all
RSVP911 said:
Thanks , I understand the point re the target , but if inflation is not consumption driven then what's the point of putting up interest rates as all this will do is drive down what little consumption is left - looks like this is what the artical says too - it's going to get very messy ! smile
I totally get your point, but some might argue we might switch to local equivalents, or put off some luxury purchases (which tend to be foreign imports, eg cars. clothes or handbags/jewellery)

dmm1983

63 posts

125 months

Monday 17th October 2016
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Ultimately it becomes a balance between inflation and unemployment. The government will care about inflation and that's the point where ordinarily you would raise rates, but by doing so you expect a rise in unemployment. Another interest rate cut will see further currency driven inflation and so one would assume that an eventual rate rise and unemployment will come, when is anyone's guess. We will all become poorer in the near term. With the price of imported goods and holidays soaring, we had all better get used to buying British, sorry, English and holidaying at home. That's what Brexit was all about, right?

Oh, wait......

nickfrog

20,874 posts

216 months

Monday 17th October 2016
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smile But the weak £ must make our UK produced Marmite so desirable to the rest of the EU, helping an export led economic recovery.

hunter 66

3,888 posts

219 months

Monday 17th October 2016
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Time to stop buying Porsche and start buying Mclaren .......