Coronavirus and car purchase
Discussion
In mid January, some time before coronavirus became widely known, I placed an order and deposit for a new car which is due around August.
The car is to be a cash purchase and a proportion of the funds are to be from managed investments (which comfortably exceeded the required amount at that time).
However, here we are a couple of months down the road, coronavirus has sprung upon us and the markets are in freefall, massively impacting on the value of such investments. This is causing me mild concern at the moment as I do not wish to be in the position to have to withdraw funds at a time of significant devaluation, or worst case scenario not have sufficient funds to proceed with the purchase.
(I do not wish to involve finance regarding the purchase).
This just led me to wonder, looking at the massive concessions being made to try and compensate for the effect of the virus elsewhere, how car manufacturers and dealers will deal with this situation, as I strongly suspect there may be many others impacted by the fallout from this pandemic
The car is to be a cash purchase and a proportion of the funds are to be from managed investments (which comfortably exceeded the required amount at that time).
However, here we are a couple of months down the road, coronavirus has sprung upon us and the markets are in freefall, massively impacting on the value of such investments. This is causing me mild concern at the moment as I do not wish to be in the position to have to withdraw funds at a time of significant devaluation, or worst case scenario not have sufficient funds to proceed with the purchase.
(I do not wish to involve finance regarding the purchase).
This just led me to wonder, looking at the massive concessions being made to try and compensate for the effect of the virus elsewhere, how car manufacturers and dealers will deal with this situation, as I strongly suspect there may be many others impacted by the fallout from this pandemic
pequod said:
Is raising a personal loan with a bank for all/most of the purchase price an option? Last time I looked, Santander (for example) was offering 60 months @ 3% for £25k which may be bettered now. Certainly wouldn't want to touch your portfolio unless you really had too, IMO.
That may have to be a consideration if things don't pick up nearer the time. Thanks.disad-vantage-d said:
In mid January, some time before coronavirus became widely known, I placed an order and deposit for a new car, which is due around August.
Everything seems to have happened before.
Probably the most well known case involved the Jaguar XJ 220. A lengthy wait, economic troubles, cancelled orders. I think there were even some court cases, where change of engine was the excuse. Don't think the full limited edition number was ever achieved.
Similar again in 2008, but that affected the whole motor industry. Huge numbers of new cars stored on airfields.
C0ffin D0dger said:
Obviously it's a stable door / horse bolted scenario but wouldn't the wise thing to have done at the time of agreeing to purchase and presumably signing a contract as such to then move the "risky" money into a low risk container e.g. a savings account.
Clearly with the benefit of hindsight. But this situation has literally came out of nowhere and developed with unprecedented rapidity.disad-vantage-d said:
Clearly with the benefit of hindsight. But this situation has literally came out of nowhere and developed with unprecedented rapidity.
Crashes, pretty much by definition, always come out of nowhere. 11 Sept 2001, 2008 financial crisis, etc. I had a friend who, in 2001, was selling his house and the buyer had to pull out because his deposit money was still held in shares just a couple of weeks before exchange. Everyone always thinks “This time is different.”
I’m not saying this to give you a hard time. In your case, a reasonably easy solution is to get finance from somewhere. But I think it is a good reminder that we always tend to underestimate the risk in the markets - I see that a lot when people criticise the return from annuities, not understanding the potential consequences of investing in (high risk) assets with an uncertain return to match a fixed outgo.
I can’t actually see any logic, as of now, in making any large purchase this year that isn’t a viable investment with clear odds favouring wealth accumulation.
As of now we are in a situation where you can spend £20k on a car and in ten years time it is worth nothing versus £20k into sensible investments at some point his year and in ten years it will be worth a fortune.
To me it’s an absolute no brainer. This market is presenting investors with a near once in a lifetime opportunity. I don’t see any logic, unless rolling on money, in buying anything other than a shed or the cheapest lease deal possible.
As of now we are in a situation where you can spend £20k on a car and in ten years time it is worth nothing versus £20k into sensible investments at some point his year and in ten years it will be worth a fortune.
To me it’s an absolute no brainer. This market is presenting investors with a near once in a lifetime opportunity. I don’t see any logic, unless rolling on money, in buying anything other than a shed or the cheapest lease deal possible.
TheInternet said:
DonkeyApple said:
sensible investments
Examples?This current phase is the sell off and rebasing phase. The weak will die, the strong survive and the new will be born. During the sell off phase you don’t want to be specifically in the market buying investments. This is the phase where you check that your current investments are suitable and you adjust your risk profile to increase your weightings in cash and cash equivalents such as gold and govt backed bonds. Any short term activity needs to recognise that the market is rebasing and the VIX is high so that means you shouldn’t be buying the dips with the retail punters but selling the peaks with the people who are making money in this phase.
The next phase is the more rational phase where stock selection begins to occur with the weak being avoided and the firms with cash and a suitable business are being selected.
In amongst that you need to be aware of likely State intervention and how that may distort the market but it is going to be via the dilution of cash so cash is only a temporary holding as you will need to convert it to assets that will hold value as the global currencies they are measured in are devalued.
And then there is the recovery phase which is when most profitable investors will be returning to buying. Cash generating businesses will be the core focus. Historically these are the defensive stocks such as the utilities etc.
Oil is also a major play as we know that it will always trend back to $75 as it is not a free market and supply is always eventually cut to match demand as those who control supply are wholly reliant on the flow of USD from oil sales to keep their women in handbags and to pay off the people who want to kill their children and take those USD for themselves.
Low oil is good for business. It adds more to the bottom line of a company than any rate cut so over the medium term it is a positive but it will trend back up and that will present an opportunity for alpha.
Simultaneously, indices are self cleansing. They periodically expel the weak and take in the strong and this makes index trackers of market cap weighted indices of interest.
It’s also a time to focus on sectors as some will clearly recover well whereas sectors that include transport, hospitality etc are likely to be absolutely shot to pieces and face entirely new economic dynamics going forward.
The key is to sit right through the current phase. Many retail investors will be trying buy on the flawed premis of referencing yeaterday’s price As some kind of metric to value today’s price. They are all losing money as is always the case with long only buyers dying the sell phase of a market rebasing. Keep your cash on the sidelines but know that at a point in the near future, 1,3, 6 months, it will be time to not hold cash as it starts to be devalued.
If you’re awash with cash, generating excess cash every month without risk and your investment portfolio is more than large enough to meet your income needs when employers determine that you no longer have any labour value then the next few months will present some excellent buying opportunities for goods. You obviously wouldn’t hold to any historic contract as values have changed. Car manufacturers will be hurling stock out the doors at huge discounts to keep the lights on.
But, if you are not cash rich and have a large enough investment portfolio then the opportunities that lie ahead dwarf any argument to go shopping for non essentials like handbags and premium cars etc.
DonkeyApple said:
you shouldn’t be buying the dips with the retail punters but selling the peaks with the people who are making money
Where do they get the stuff they're going to sell at the peaks? Or do you simply mean recycling stuff they no longer want at all (i.e. crystallising losses) into stuff they do want - or cash?DonkeyApple said:
cash is only a temporary holding as you will need to convert it to assets that will hold value
Agreed. No point selling, feeling pleased with yourself, being too scared to get back into the market and then being murdered on your cash.DonkeyApple said:
the recovery phase which is when most profitable investors will be returning to buying. Cash generating businesses will be the core focus. Historically these are the defensive stocks such as the utilities etc.
Agreed, no point buying medical supplies manufacturer and service. They will show good past performance but that game should be over.DonkeyApple said:
Oil … is not a free market and supply is always eventually cut to match demand
Agreed, although reversion to norm looks so obvious I'm not seeing great opportunity there. DonkeyApple said:
indices are self cleansing.
Agreed, although they're slow to get there. IIRC constituents of the FTSE indices are only updated at 3 month intervals. Current circumstances are moving a shed-load faster than that so indices could be along way behind the ball.DonkeyApple said:
It’s also a time to focus on sectors as some will clearly recover well whereas sectors that include transport, hospitality etc are likely to be absolutely shot to pieces and face entirely new economic dynamics going forward.
Agreed.DonkeyApple said:
If you’re awash with cash … the next few months will present some excellent buying opportunities for goods.
Agreed. Including decent restaurants and wine merchants! Nobody wants a redundant vintage stuck in their warehouse.DonkeyApple said:
if you are not cash rich and have a large enough investment portfolio then the opportunities that lie ahead dwarf any argument to go shopping for non essentials
I think people who have been living off "equity income" portfolios are in a for a nasty shock when they find not only has their balance sheet shrunk by 25% but their income stream has dropped to a fraction of what it used to be. I think dividends may get absolutely mullered. Prudent people will have been running a significant cash reserve despite the ongoing pain of losing value in real terms. Anyone who thought 12 years of bull market would never end is due for a rough ride.Back to topic - cheap cars? Oh yes. The best time to buy will IMO be early while they're desperate to convert built cars into cash. Unfortunately I don't need a new car at the moment. But a big new hi-fi might help cheer up those long days stuck at home...? Perhaps a couple of nice sofas as well...?
rockin said:
Prudent people will have been running a significant cash reserve despite the ongoing pain of losing value in real terms. Anyone who thought 12 years of bull market would never end is due for a rough ride.
Those are 2 very 'holier than thou' statements. If you had kept cash for the last 24/36 months or so you have missed out on one of the biggest rises in stocks for years, even more so if you had been invested in tech and US markets. At the same time cash in the bank was losing real value, so the % loss vs stocks would have been even worse than it appears. Given as nobody knew what was going to turn this around had covid not happened the bull run could have continued for another 5 years if Trump had got in for a 2nd term and supported markets with more rate or tax cuts. Of course it was going to end somewhere, but when and how is an unknown until after the fact. I would say prudent people will have been balls deep in equities then booked their profits at the first sign of trouble when covid escaped from China. Even then, if it had been contained quickly and not spread the market could have easily shrugged it off again.
All sounds like hindsight trading, which does nobody any good. You can only base decisions on what is in front of you and what your risk appetite is.
Condi said:
Those are 2 very 'holier than thou' statements. If you had kept cash for the last 24/36 months or so you have missed out on one of the biggest rises in stocks for years, even more so if you had been invested in tech and US markets.
It's called asset-liability matching. If you have a short-term use for the cash, it should not be invested in volatile assets such as equities.That's a market neutral view. I moved the deposit for my next property into cash when I started looking in December/January time, even though stocks at that point appeared to be on a tear.
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