New car sales 75% via PCP
Discussion
I'm not sure how car salesman are remunerated but my son was recently looking to buy a new car, he went in to the Mercedes dealer in Chelmsford and as soon as my son said he would be buying the car cash the salesmen literally just turned off, he didn't want to know any more, we assumed his commission was based on how many leases he sells.
CaptainSlow said:
SystemParanoia said:
CaptainSlow said:
SystemParanoia said:
CaptainSlow said:
Cars 5+ years old become scrap value.
Please let me know where all these £100 5 year old cars are ?!
Digga said:
"Inventory" seems to have been climbing every year for 5 years.
It's not quite that simple.Firstly what really matters is the ratio of inventory to sales or inventory to COGS, not the absolute value of inventory.
(If they sell twice as many cars then they will need a bit more inventory!!!)
That has actually gone up since 2014, but is relatively stable now over the last three years at 140-150 days sales and 120-130 days COGS.
It's really going to be a problem for finance companies not dealers.
Dealers are much more reliant on volumes than prices, typically.
Whereas if you need to sell thousands of second hand 3-year-old cars to raise cash to lend out and suddenly those cars are worth 20% less than you thought, that's one hell of a write down to your business!
CaptainSlow said:
walm said:
It's really going to be a problem for finance companies not dealers.
Dealers are much more reliant on volumes than prices, typically.
It's a problem for dealers when all their volume shift to discounted sales to finance houses.Dealers are much more reliant on volumes than prices, typically.
Amazing how many nice, new cars there are on the roads these days, a neighbour of ours has a new six series BMW and a Range Rover, they change every few months.
Gone are the days when your car was evidence of your actual net worth, gone are the days of people arsing about with stuff really only fit for the scrap heap (Slow, you are excused from that), anyone earning isnt that far off being able to stick a new car on the drive, for £500 down and £100 (sometimes less) a month you can have a brand new supermini.
I can totally see why people do it, nice new car and really, if you weight it up, is running a banger that much cheaper in the long run, and even if it is, how much cheaper and what price do you put on not having to worry about it breaking and having to fix it, wear and tear, having to dispose of it.
Doesnt really stack up for me personally at the moment but I may do when it does.
Suits the manufacturers all the punters buying new stuff, no point making all these cars if there are no means to buy one for many.
I remember the seventies and eighties and some of the utter s
t heaps that were around, this persuades the real crap off the roads a bit quicker and modern stuff lasts better anyway.
Gone are the days when your car was evidence of your actual net worth, gone are the days of people arsing about with stuff really only fit for the scrap heap (Slow, you are excused from that), anyone earning isnt that far off being able to stick a new car on the drive, for £500 down and £100 (sometimes less) a month you can have a brand new supermini.
I can totally see why people do it, nice new car and really, if you weight it up, is running a banger that much cheaper in the long run, and even if it is, how much cheaper and what price do you put on not having to worry about it breaking and having to fix it, wear and tear, having to dispose of it.
Doesnt really stack up for me personally at the moment but I may do when it does.
Suits the manufacturers all the punters buying new stuff, no point making all these cars if there are no means to buy one for many.
I remember the seventies and eighties and some of the utter s
t heaps that were around, this persuades the real crap off the roads a bit quicker and modern stuff lasts better anyway.J4CKO said:
Amazing how many nice, new cars there are on the roads these days, a neighbour of ours has a new six series BMW and a Range Rover, they change every few months.
There are no normal finance deals that allow you to get a new car every few months.Maybe they're both in car sales, or they work for BMW and LandRover. Or they somehow qualify as VIPs.
Digga said:
johnfm said:
Adrian W said:
Its a time bomb, I have seen cars where the total lease cost is less than the depreciation of the car, irrelevant of what the lease company actually paid for it, places like Bruntingthorp are filled to capacity with lease returns, if they dump them on to the used market it will either destroy it or dramatically effect new car sales.
I still believe that this will be the next big finance scandal, those that work in finance on here have said its rubbish (but they would) but I believe it will transpire that there is a gap between the actual value of returned lease cars and the asset value on the lease companies books, it cant be sustainable.
Yep - I've heard just one large finance co has around 4,000+ in storage there.I still believe that this will be the next big finance scandal, those that work in finance on here have said its rubbish (but they would) but I believe it will transpire that there is a gap between the actual value of returned lease cars and the asset value on the lease companies books, it cant be sustainable.
When you go and spec out some asthmatic engined white Audi S line, and the bill comes to something silly like 35 grand then nobody in their right mind would likely spend that kind of capital on a poverty spec Eurobox when you could pick up a barely used top spec model at a couple of years old.
The only market for the bland badge engineered 99p burgers of the car manufacturers is the 299 quid a month brigade with 5 grand ''dealer finance contribution'.
Owners get to park a brand new debadged German box on their drive, manufacturers offload their excess capacity risk onto the finance houses who offload the risk onto investors with packaged bonds.
I was given a 36k spec'd C class as a courtesy car recently, and it felt like plastic junk compared to my 6 year old E350 which might be worth a 1/3 of the amount on paper is fully paid for.
I think without PCP the vast majority of the S line/ M spec AMG look entry models would not get sold, or would need to be cut in price massively.
You can always spot the PCP returns, they never have any options fitted.
The only market for the bland badge engineered 99p burgers of the car manufacturers is the 299 quid a month brigade with 5 grand ''dealer finance contribution'.
Owners get to park a brand new debadged German box on their drive, manufacturers offload their excess capacity risk onto the finance houses who offload the risk onto investors with packaged bonds.
I was given a 36k spec'd C class as a courtesy car recently, and it felt like plastic junk compared to my 6 year old E350 which might be worth a 1/3 of the amount on paper is fully paid for.
I think without PCP the vast majority of the S line/ M spec AMG look entry models would not get sold, or would need to be cut in price massively.
You can always spot the PCP returns, they never have any options fitted.
J4CKO said:
I can totally see why people do it, nice new car and really, if you weight it up, is running a banger that much cheaper in the long run, and even if it is, how much cheaper and what price do you put on not having to worry about it breaking and having to fix it, wear and tear, having to dispose of it.
I've never run a new car, rarely had a car less than 5 years old and usually run well beyond 100,000 miles. But I haven't had a car break down for over 20 years.Occasionally a service will show up something that needs replacing, usually for less than the monthly payment on a lease would be. But I certainly sit around 'worrying' about it. Obviously some older cars break down, but so do some brand new ones.
KTF said:
Digga said:
I'd always niavely assumed that if you had a Range Rover, you had money - either cash or a modest HP loan - but clearly, given the sheer numbers of the things (and many of those parked outside very modest properties), I was way wrong.
If you had 100k, why would you put it all in a depreciating asset when you can put a small amount towards the car and invest (or whatever) the rest to offset the interest?t back and get another new one! (or do something else). Its a bad attitude to have mind (throw away and replace rather than fix and mend) but thems the breaks.
ThunderGuts said:
johnfm said:
Yep - I've heard just one large finance co has around 4,000+ in storage there.
Sounds like unsustainable (for the Co) balance sheet management, holding a weakening asset back.It's all a bit mad.
Sheepshanks said:
Hmmm...someone on here, who had worked as a LandRover salesman, said the vast majority of FFRRs are bought cash. Evoques, on the other hand, were almost always on finance.
I can believe this. I get the feeling that the Evoques appeal to the yummy mummy brigade who would like to own a proper Rangie but don't have £70K+ cash knocking about so a PCP deal gets them the next best thing.BRR said:
doesn't surprise me to hear that it's 75% bought on PCP, however I also assume quite a lot of used cars are purchased in the same way now presuming that they're under 5 years old? a few years back I was looking at buying a used Boxster and the salesman was trying to push a PCP deal
We bought a 1 year old Mazda 3. Offered both a normal HP type loan and a PCP option from the dealer. Had saved half the money in cash anyway and a loan from our bank had seriously better APR along with flexibility on repayments. There must be some people who take them up on the offer though!Here in the USA most of the major manufacturers own their own finance houses and leases are run through those sources. The 3 yr lease is usually the most attractive as it means that the dealer network has a prime stock of used inventory coming back to them still under warranty and ready for CPO status. I can't believe that the U.K. is any different?
For people who do low to mid range mileage and like a new car every 3 years leasing makes a huge amount of sense. For example, BMW 330i x drive. MSRP $43,395 plus tax. Lease for $558 per month (ave with cash down and tax rolled in) with 10k miles per year allowed. Or finance for 60 months at 2.91% = $835 per month. So after 36 months on the lease you've paid $20,088. On the loan you've paid $30,060 and owe $20,040. The car is worth $24k assuming a 55% residual. You've saved $6k by leasing , you haven't had to worry about depreciation and you're now driving a new car.
In reality if the buyer stays with the same brand he's probably flipped into a new lease after 30 or 32 months as most manufacturers offer early lease termination for repeat customers, making leasing even more attractive.
Maybe the U.K. is different but I can't think why,.
For people who do low to mid range mileage and like a new car every 3 years leasing makes a huge amount of sense. For example, BMW 330i x drive. MSRP $43,395 plus tax. Lease for $558 per month (ave with cash down and tax rolled in) with 10k miles per year allowed. Or finance for 60 months at 2.91% = $835 per month. So after 36 months on the lease you've paid $20,088. On the loan you've paid $30,060 and owe $20,040. The car is worth $24k assuming a 55% residual. You've saved $6k by leasing , you haven't had to worry about depreciation and you're now driving a new car.
In reality if the buyer stays with the same brand he's probably flipped into a new lease after 30 or 32 months as most manufacturers offer early lease termination for repeat customers, making leasing even more attractive.
Maybe the U.K. is different but I can't think why,.
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