The economics of new car sales
Discussion
Snollygoster said:
Grandfondo said:
Justin Case said:
Grandfondo said:
And round and round we go but the fact is that PCP/lease gets some people into cars they can't afford to own FACT!
By your logic, you have proved that a PCP is more cost-effective than outright purchase 
A PCP is a way to purchase a car without investing as much initial capital, and allows you to offset the final payment until later in the agreement. Just because the majority of people don't go into a dealership and purchase a car fully outright, doesn't mean they can't afford it. PCP is just a slightly different HP, which people have bought cars on for years and years; yet I'd imagine you'd perceive them to "afford to own" their car
But according to your logic I can't afford a house. I would like to think the mortgage company would disagree.
Snollygoster said:
Either way, your original statement is completely stupid. We are responsible lenders, and would not grant credit to someone who "couldn't afford it".
A PCP is a way to purchase a car without investing as much initial capital, and allows you to offset the final payment until later in the agreement. Just because the majority of people don't go into a dealership and purchase a car fully outright, doesn't mean they can't afford it. PCP is just a slightly different HP, which people have bought cars on for years and years; yet I'd imagine you'd perceive them to "afford to own" their car
But according to your logic I can't afford a house. I would like to think the mortgage company would disagree.
The original statement is a statement of fact if even only one peson has had one repossessed!A PCP is a way to purchase a car without investing as much initial capital, and allows you to offset the final payment until later in the agreement. Just because the majority of people don't go into a dealership and purchase a car fully outright, doesn't mean they can't afford it. PCP is just a slightly different HP, which people have bought cars on for years and years; yet I'd imagine you'd perceive them to "afford to own" their car
But according to your logic I can't afford a house. I would like to think the mortgage company would disagree.
HP if gone full term you "owned " the vehicle whereas only a tiny percentage pay off the balloon!
There are plenty even tens of thousands of house repossessions every year of houses that people thought the could "afford"!
Grandfondo said:
Justin Case said:
Grandfondo said:
And round and round we go but the fact is that PCP/lease gets some people into cars they can't afford to own FACT!
By your logic, you have proved that a PCP is more cost-effective than outright purchase I have a TV in my house; at some point it will be replaced. Whether I own it or rent it makes absolutely no difference to the films and programmes I watch on it.
Do you have Sky or Virgin TV? Because paying subscriptions for TV programmes is what the peasants do, you should only buy blurays and boxed sets.
What is the fascination with other people's possessions? It smacks of "you shouldn't be allowed to have that" snobbery.
thelawnet said:
Antony Moxey said:
Well she is so what's your point? You don't particularly like her car of choice so therefore it's a bad deal? Perhaps she'd look at your choice of car, and how you chose to pay for that car and scoff equally as dismissively - perhaps she'd have a point.
My point was that the audience for new cars ranges from 17 to 70 or so, and I would imagine the portion of that spectrum for which a new Ka, Up! or similar is an aspirational item is relatively small. So it suggests there are other reasons than 'I want a shiny 64 plate on my drive, that all those tens of thousands of new Fiestas are being purchased onto credit.To my mind the most likely explanation is effective financial marketing, essentially. The same process whereby we have been convinced to spend four times as much for our housing, so that the banks can roll it up in trillions of pounds worth of debt. The credit products create the demand, rather than the other way round.
Although at least, to be fair, the automotive credit sector produces something tangible - I don't think that's a bad thing, it's just interesting the extent to which these financial products drive our society.
If we get another car in future - my wife's (owned and paid in cash) car will need renewing in a year or so, I must make sure I've studied the financial markets first before putting all the neighbour's noses out of joint by having a brand new car on the drive, I'll make sure the b*st*rds are jealous and want to be rich like me, hell yeah.
xRIEx said:
Grandfondo said:
There are plenty even tens of thousands of house repossessions every year of houses that people thought the could "afford"!
So? Some people are stupid with money. What's your point? xRIEx said:
Grandfondo said:
There are plenty even tens of thousands of house repossessions every year of houses that people thought the could "afford"!
So? Some people are stupid with money. What's your point? Personally, I can see the advantages in leasing:
New car, so no repair and MOT costs
Increasingly, no servicing costs (as many manufacturers are pushing service items to the 3 year mark) on reasonable mileage
Predictable cost of ownership - the leasing company are taking the risk on the depreciation compared to the individual
Compared to used cars (a comparison that many on here seem to make) the increasing complexity of new cars means that to the non-Petrolhead the peace of mind that some catastrophic isn't just around the bend can't be ignored.
If all of this can be achieved at a similar cost to buying outright then I can't see the downside.
People can always trot out examples of how one worked out better than the other for them, but the car manufacturers are increasingly driving the PCP/Lease model and part of that is making it financially attractive to do so. As long as you're flexible on make and model there are deals to be had that just didn't exist years ago. As someone pointed out, this is skewing the market against outright purchases. The real question isn't whether a particular individual can afford it, but whether the model is sustainable in the long term. The German manufacturers especially seem to be chasing registrations and are willing to make it financially attractive to do it.
On a personal note, I wouldn't have considered a lease or PCP 5 years ago, but I would now as a direct result of the cost of a given leas or loan falling - even though I could afford an outright purchase. This is not because I've convinced myself that it's cheaper, but because the cost is so similar and takes the hassle and risk out of using my own money.
There are many people paying mortgages on houses they can't afford! They have interest only mortgages and have no spare capacity to raise the extra money needed to pay the debt off at the end of the loan period . The only reason they are managing is that interest rates are so low does that really qualify as "affordable"?
PCP in some cases can be the same, sure they can afford the monthly amounts but have no means to pay the balloon payment at the end of the loan period and may even be in the situation where they can't use the car due to mileage restrictions , forced to repeat every 3 or 4 years.
I wouldn't describe either situation as affording or managing.
Those that think the discounts offered on cars with pcp mean that the deal is cheaper aren't looking at the total cost of ownership , a discount on the sticker prices simply comes from a discount on the total interest paid , looks good on paper but you still end up paying the difference elsewhere
PCP in some cases can be the same, sure they can afford the monthly amounts but have no means to pay the balloon payment at the end of the loan period and may even be in the situation where they can't use the car due to mileage restrictions , forced to repeat every 3 or 4 years.
I wouldn't describe either situation as affording or managing.
Those that think the discounts offered on cars with pcp mean that the deal is cheaper aren't looking at the total cost of ownership , a discount on the sticker prices simply comes from a discount on the total interest paid , looks good on paper but you still end up paying the difference elsewhere
Antony Moxey said:
thelawnet said:
daemon said:
As someone has posed already - which makes more sense -
Which is going to give you more satisfaction? Looking out the window and thinking "s
t, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?
It's complicated. Unless you are a 17-year-old girl, I'm not sure you are get much pride about owning a Seat Mii anyway. - Spending £10,000 cash on a Seat MII?
- Paying £119 deposit and £119 a month?
Which is going to give you more satisfaction? Looking out the window and thinking "s
t, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?It's highly ignorant to assume that someone would not take pride in owning one just because it is cheap and basic.
You probably also assume that anything with a BMW / Audi badge on it is automatically class leading.
liner33 said:
PCP in some cases can be the same, sure they can afford the monthly amounts but have no means to pay the balloon payment at the end of the loan period and may even be in the situation where they can't use the car due to mileage restrictions , forced to repeat every 3 or 4 years.
The whole point in PCP deals is that you dont pay the residual - though you have the option to do so. If you wanted to keep the car long term, you'd take out a loan or HP over a longer period.Therefore it would be quite reasonable that someone doesnt budget to have £10,000 available to pay off the balloon. Again, that doesnt mean they cant "afford" the payments.
Also, it does bemuse me that you think people are "trapped" in a cycle of PCP deals. I think you think it comes to the end of the term and people are sitting around crying going "god no, i'm in this cycle of PCP deals, where do is sign for yet another 320d? Why god why?". The reality is at the end of term you can simply hand the car back (one of several options to dispose of the car that you would have) and can go do what you want from there - whether that be buy a car for cash, take out a loan / hp for your next car, or what ever you want really.
So noone is forced to do anything.
liner33 said:
Those that think the discounts offered on cars with pcp mean that the deal is cheaper aren't looking at the total cost of ownership , a discount on the sticker prices simply comes from a discount on the total interest paid , looks good on paper but you still end up paying the difference elsewhere
Its not necessarily cheaper. It might not even be cheaper. It might be more expensive. However its certainly not in the league of necessarily costing thousands more.Have a look at the z4 sdrive28i deal from the drop down on this page.
http://www.bmw.co.uk/en_GB/topics/owners/offers/z4...
BMW UK Finance Contribution = £6,500
Interest + Charges = £4,000
And to reiterate AGAIN and for the avoidance of doubt, noone is saying people are "stupid" for buying with cash, or that its a bad idea, merely that there are other ways to achieve the same result (ie, driving the car you want) that arent necessarily more expensive to do.
Edited by daemon on Sunday 23 November 10:29
daemon said:
Its not necessarily cheaper. It might not even be cheaper. It might be more expensive. However its certainly not in the league of necessarily costing thousands more.
Have a look at the z4 sdrive28i deal from the drop down on this page.
http://www.bmw.co.uk/en_GB/topics/owners/offers/z4...
BMW UK Finance Contribution = £6,500
Interest + Charges = £4,000
And to reiterate AGAIN and for the avoidance of doubt, noone is saying people are "stupid" for buying with cash, or that its a bad idea, merely that there are other ways to achieve the same result (ie, driving the car you want) that arent necessarily more expensive to do.
That's the point - it's not necessarily cheaper or more expensive, there are too many variables involved. That's why in some cases it's better (Golf R) and some it isn't (GT86, potentially). Have a look at the z4 sdrive28i deal from the drop down on this page.
http://www.bmw.co.uk/en_GB/topics/owners/offers/z4...
BMW UK Finance Contribution = £6,500
Interest + Charges = £4,000
And to reiterate AGAIN and for the avoidance of doubt, noone is saying people are "stupid" for buying with cash, or that its a bad idea, merely that there are other ways to achieve the same result (ie, driving the car you want) that arent necessarily more expensive to do.
Edited by daemon on Sunday 23 November 10:29
With a lease there is no risk on depreciation and minimal risk on costs. This is very attractive to many people, not necessarily people drowning in debt. I know plenty of people within 10 years of retirement who now get car allowances rather than the company car they used to have, either because their car scheme was discontinued or company car tax making it unattractive. Most have either no mortgage or a minimal amount left to pay, but prefer to lease.
Grandfondo said:
The original statement is a statement of fact if even only one peson has had one repossessed!
No one has particular issue with "the original statement" as you call it, which is that PCP deals put "some" people into cars they cannot afford.However, its these sorts of statements that gets peoples backs up, and frankly has alienated you to the point where you might have to change your name again!
Grandfondo said:
Are the majority of people leasing/PCP'ing because it's cheaper or is it the fact it gets them into cars they could not afford to own?
Grandfondo said:
do people really believe that because you can rent one for 36 months that you can actually afford to own one?
Grandfondo said:
Most people using the smoke and mirror method of car "ownership" don't have the fking money!!!!!!!
king money!!!!!!!Grandfondo said:
That's why it's called Perpetual Car Prison!
I'm also not sure why it matters if you own or rent/lease your car.
The argument for property ownership , in the UK at least, is pretty clear. Property values are on an upward trend, so the barrier to entry is constantly increasing. This in turn is driving rental costs up. So by owning your property you're reducing the risk of being priced out of the market and, to a certain extent, stabilising your long term repayment amount (subject to interest rate changes, obviously).
None of the above really applies to most cars. In general:
They fall in value
Cost more and more to maintain
So who cares if you rent them? Assuming you're not going to buy a car, use it all your life and then hand it down to your children I can't see the point.
Yes, there are some cars that buck the trend and increase in value but they are typically enthusiast models with low annual mileage. Fine if you're buying and selling to make a profit, but not realistic if you're doing 12k a year (none of the appreciating mk1 golfs have 250k miles on them)
The argument for property ownership , in the UK at least, is pretty clear. Property values are on an upward trend, so the barrier to entry is constantly increasing. This in turn is driving rental costs up. So by owning your property you're reducing the risk of being priced out of the market and, to a certain extent, stabilising your long term repayment amount (subject to interest rate changes, obviously).
None of the above really applies to most cars. In general:
They fall in value
Cost more and more to maintain
So who cares if you rent them? Assuming you're not going to buy a car, use it all your life and then hand it down to your children I can't see the point.
Yes, there are some cars that buck the trend and increase in value but they are typically enthusiast models with low annual mileage. Fine if you're buying and selling to make a profit, but not realistic if you're doing 12k a year (none of the appreciating mk1 golfs have 250k miles on them)
Edited by survivalist on Sunday 23 November 11:24
WinstonDg said:
Antony Moxey said:
thelawnet said:
daemon said:
As someone has posed already - which makes more sense -
Which is going to give you more satisfaction? Looking out the window and thinking "st, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?
It's complicated. Unless you are a 17-year-old girl, I'm not sure you are get much pride about owning a Seat Mii anyway. - Spending £10,000 cash on a Seat MII?
- Paying £119 deposit and £119 a month?
Which is going to give you more satisfaction? Looking out the window and thinking "s
t, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?It's highly ignorant to assume that someone would not take pride in owning one just because it is cheap and basic.
You probably also assume that anything with a BMW / Audi badge on it is automatically class leading.
liner33 said:
There are many people paying mortgages on houses they can't afford! They have interest only mortgages and have no spare capacity to raise the extra money needed to pay the debt off at the end of the loan period . The only reason they are managing is that interest rates are so low does that really qualify as "affordable"?
More relevant to the argument in this thread is there are many people renting houses at rents that bear no relation to the value of the house and they'd never be able to get a mortgage to buy that property.WinstonDg said:
Antony Moxey said:
thelawnet said:
daemon said:
As someone has posed already - which makes more sense -
Which is going to give you more satisfaction? Looking out the window and thinking "st, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?
It's complicated. Unless you are a 17-year-old girl, I'm not sure you are get much pride about owning a Seat Mii anyway. - Spending £10,000 cash on a Seat MII?
- Paying £119 deposit and £119 a month?
Which is going to give you more satisfaction? Looking out the window and thinking "s
t, that cost me £10,000" or "wow i've a brand new car on my drive for £119 a month"?It's highly ignorant to assume that someone would not take pride in owning one just because it is cheap and basic.
You probably also assume that anything with a BMW / Audi badge on it is automatically class leading.
Sheepshanks said:
More relevant to the argument in this thread is there are many people renting houses at rents that bear no relation to the value of the house and they'd never be able to get a mortgage to buy that property.
Yes along the same lines, renting but all available cash taken up so not being able to afford the deposit to get a mortgage yourself a good comparison to pcp Lets not forget that finance used to be called (and sometimes still is) "HIRE" purchase , you hire the goods and they become yours only when the balance is paid in full, if you only pay the hire part and never the balance arent you really just renting?
liner33 said:
Lets not forget that finance used to be called (and sometimes still is) "HIRE" purchase , you hire the goods and they become yours only when the balance is paid in full,
I think you've also misunderstood the meaning of finance - it is a collective term for methods of funding. It didn't "used to be" called hire purchase, hire purchase is one form of finance.liner33 said:
if you only pay the hire part and never the balance arent you really just renting?
Yes. And?My post earlier on that subject:
xRIEx said:
Grandfondo said:
Justin Case said:
Grandfondo said:
And round and round we go but the fact is that PCP/lease gets some people into cars they can't afford to own FACT!
By your logic, you have proved that a PCP is more cost-effective than outright purchase I have a TV in my house; at some point it will be replaced. Whether I own it or rent it makes absolutely no difference to the films and programmes I watch on it.
Do you have Sky or Virgin TV? Because paying subscriptions for TV programmes is what the peasants do, you should only buy blurays and boxed sets.
What is the fascination with other people's possessions? It smacks of "you shouldn't be allowed to have that" snobbery.
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