Car credit hits £58bn out of total consumer credit of £200bn
Discussion
V8 FOU said:
Isn't this all a bit scary?
The Bank of England and the FCA are taking an increasing interest in what is happening.
Credit secured on depreciating asset etc, blah, blah.
When the base rate increases next month, will this affect car sales.
New car sales are down nearly 10% this September.
Or is it just that no one gives a flying f***?
I would be interested in others (sensible) views on this.
you cant say anything here on car hire schemes before people getting all jittery, the truth is that almost all new cars on the road are owned by banks....The Bank of England and the FCA are taking an increasing interest in what is happening.
Credit secured on depreciating asset etc, blah, blah.
When the base rate increases next month, will this affect car sales.
New car sales are down nearly 10% this September.
Or is it just that no one gives a flying f***?
I would be interested in others (sensible) views on this.
and the banks are losing money due to the cars value depreciating.
whats difficult to understand? but hey that new car smell is nice.
V8 FOU said:
Isn't this all a bit scary?
The Bank of England and the FCA are taking an increasing interest in what is happening.
Credit secured on depreciating asset etc, blah, blah.
When the base rate increases next month, will this affect car sales.
New car sales are down nearly 10% this September.
Or is it just that no one gives a flying f***?
I would be interested in others (sensible) views on this.
I finished paying my mortgage in 2015, bought both my current cars with cash so am currently in the black! The Bank of England and the FCA are taking an increasing interest in what is happening.
Credit secured on depreciating asset etc, blah, blah.
When the base rate increases next month, will this affect car sales.
New car sales are down nearly 10% this September.
Or is it just that no one gives a flying f***?
I would be interested in others (sensible) views on this.
But AFAIK nobody "buys" a car any more, they just lease/rent it for the lowest monthly payment.
This trend is unlikely to go away, whatever interest rates do - because nobody does actually give a flying f*ck! (well not until it all comes crashing down around their ears).
ericmcn said:
you cant say anything here on car hire schemes before people getting all jittery, the truth is that almost all new cars on the road are owned by banks....
and the banks are losing money due to the cars value depreciating.
whats difficult to understand? but hey that new car smell is nice.
You make it sound like the banks don't know that cars will depreciate in value. Really?and the banks are losing money due to the cars value depreciating.
whats difficult to understand? but hey that new car smell is nice.
The reality is that the banks who provide car finance still make money despite the depreciation, otherwise they wouldn't be in business for very long.
rallycross said:
I blame all the wannabes who are signed up to finance deals on horrible over priced blinged up diesel Audi's.
You know who I mean - the ones who are proud of 'their' new car - which they hire for between £250 and £600 a month and have nothing to show but a hole in their finances at the end of the agreement.
The only thing I have to show for it is that the car cost me £5.2k over 2 years rather than £7.5k worth of depreciation even if I had bought at the max discount.You know who I mean - the ones who are proud of 'their' new car - which they hire for between £250 and £600 a month and have nothing to show but a hole in their finances at the end of the agreement.
And even at 2% interest, the £22k outlay would have cost me £900 worth of mortgage interest during that period
So given that I insist on new cars, why would I choose to spend £8.4k rather than £5.2k ?
I have asked a few times before and never got an answer so I am not holding my breath.
Not particularly proud of the new car but it's better than an older one which would have probably not been much cheaper than £5.2k when all factors are taken into account as the new one cost me £0 in warranty, repairs, brakes, tyres, MOT, tax or servicing. Just £20 worth of Adblue.
But yes I am probably a "wannabe". Want to be what, I have no idea.
Edited by nickfrog on Friday 6th October 06:27
Mandat said:
You make it sound like the banks don't know that cars will depreciate in value. Really?
The reality is that the banks who provide car finance still make money despite the depreciation, otherwise they wouldn't be in business for very long.
That makes sense, usually one mob that you can count on making money for themselves is the banks.The reality is that the banks who provide car finance still make money despite the depreciation, otherwise they wouldn't be in business for very long.
And yet -
nickfrog said:
The only thing I have to show for it is that the car cost me £5.2k over 2 years rather than £7.5k worth of depreciation even if I had bought at the max discount.
Maybe the banks are buying at a greater discount than any member of the public is likely to achieve and that makes the difference?The part I don't understand is what happens next. It's been mentioned and suggested that they are all in storage at places like Bruntingthorpe and for sure there's plenty of cars there but they are still depreciating by the month and unlike when they re with the customer, nobody is picking up the tab.
Releasing those vehicles could mean lower values and in turn higher costs for new PCP customers and some less sales but is it worth hanging on to those cars just to avoid that? Surely they are better off getting those cars to market rather than sitting on them while they bleed value?
I still don’t understand what’s supposed to cause this mass defaulting on loan agreements which will bring the whole “system” crashing down.
Interest rates go up, but these are fixed rate finance agreements so the cost doesn’t change. Sure, when the next deal time rolls around it might be unaffordable, so they go used/cheaper instead.
Where’s the massive sub-prime lending to cause the huge losses? I’m not seeing it.
Interest rates go up, but these are fixed rate finance agreements so the cost doesn’t change. Sure, when the next deal time rolls around it might be unaffordable, so they go used/cheaper instead.
Where’s the massive sub-prime lending to cause the huge losses? I’m not seeing it.
Steve H said:
And yet -
There is that. I have no doubt that VW FS, who my contract is with, get a very good deal out of VAG (obviously!) and covers its capex with money at very very low rates.nickfrog said:
The only thing I have to show for it is that the car cost me £5.2k over 2 years rather than £7.5k worth of depreciation even if I had bought at the max discount.
Maybe the banks are buying at a greater discount than any member of the public is likely to achieve and that makes the difference?The other aspect is aggressive yield management. My deal was actually more than what other Phers who got it at £4,700. There is always a good deal somewhere if you jump fast and are not bothered about the badge or the colour.
I assume that the Brunters type huge buffer stocks are better value than the ensuing drop in overall value that a sudden flooding of supply would generate. That's also yield management but at the back end.
Steve H said:
Maybe the banks are buying at a greater discount than any member of the public is likely to achieve and that makes the difference?
Large fleets obtain huge discounts.Look at the low residuals obtained on the majority of tatty ex motability fleet sheds. Even with government subsidies the figures would not stack up if massive discounting wasn't factored in.
Propped up by us tax payers and for many years widely abused as a system, what could possibly go wrong.
Steve H said:
The part I don't understand is what happens next. It's been mentioned and suggested that they are all in storage at places like Bruntingthorpe and for sure there's plenty of cars there but they are still depreciating by the month and unlike when they re with the customer, nobody is picking up the tab.
They're not in storage, they're held there awaiting disposal around the country to various auctions at various times.2.5m new cars registered every year = 2.5m used cars coming back on to the market in a pool of 31m cars. So roughly 8% per year. Thats offset at the other end by old cars coming off the road.
charltjr said:
I still don’t understand what’s supposed to cause this mass defaulting on loan agreements which will bring the whole “system” crashing down.
Interest rates go up, but these are fixed rate finance agreements so the cost doesn’t change. Sure, when the next deal time rolls around it might be unaffordable, so they go used/cheaper instead.
Where’s the massive sub-prime lending to cause the huge losses? I’m not seeing it.
Exactly. You're not seeing it because it wont happen.Interest rates go up, but these are fixed rate finance agreements so the cost doesn’t change. Sure, when the next deal time rolls around it might be unaffordable, so they go used/cheaper instead.
Where’s the massive sub-prime lending to cause the huge losses? I’m not seeing it.
Correct this is a huge phase of over consumption and people driving 30-60k cars and then wonder why in 3 years they are worth half he value. It's a huge amount of value to lose and the brakes will come in when interest rates go up let alone the debt mountain is still going up because of the depreciation. Simply putting a new deposit in doesn't stop the fact that a hue percentage loss of value is paid by the consumer. No one seems to be facing the music so far
joeshaw123 said:
That's UK's national/government debt. And its more like £1.8T now?
Total consumer credit is £200B, that's all credit cards, store cards, personal loans and car finance (leases not included?), and not including mortgages. So £58B is a large proportion of it! Add to that as mentioned any unsecured personal loans that have been used to purchase cars (myself included here), and its probably much greater than that.
I think the majority of people have a general feeling of apathy towards this to be honest.
The majority of my friends/colleagues have no interest in cars but buy their new cars on PCP, it's just what they do. Trade in the 3-5 year old one to cover balloon/sign up for a new 3-5 year deal that they budget for. I would say 95% of them have one that is well within their means and they just budget for it accordingly out of their monthly salary, they like that its warrantied and maintenance plans can be included too. This bit doesn't worry me.
Sales will surely drop as interest rates rise.
I do feel like something has to give though. How can we consume 2.5M+ brand new cars a year? Over 50% of that is fleet sales. So in 3 years thats 1.3M, 3 year old fleet cars for sale, every year. How do we need so many?
Sorry for the ramble.
Total consumer credit is £200B, that's all credit cards, store cards, personal loans and car finance (leases not included?), and not including mortgages. So £58B is a large proportion of it! Add to that as mentioned any unsecured personal loans that have been used to purchase cars (myself included here), and its probably much greater than that.
I think the majority of people have a general feeling of apathy towards this to be honest.
The majority of my friends/colleagues have no interest in cars but buy their new cars on PCP, it's just what they do. Trade in the 3-5 year old one to cover balloon/sign up for a new 3-5 year deal that they budget for. I would say 95% of them have one that is well within their means and they just budget for it accordingly out of their monthly salary, they like that its warrantied and maintenance plans can be included too. This bit doesn't worry me.
Sales will surely drop as interest rates rise.
I do feel like something has to give though. How can we consume 2.5M+ brand new cars a year? Over 50% of that is fleet sales. So in 3 years thats 1.3M, 3 year old fleet cars for sale, every year. How do we need so many?
Sorry for the ramble.
I dont think the lease market is that dangerous as the terms on the cars are typically 3 years or less, if someone defaults some men come and take the shiny thing away ?
It seems to work for a lot of people but I do wonder how many are stretching their finances to have the use of an Evoque or similar on a fairly low salary.
I think in the past lower earners would assume that car is for people with money, but they now have a route into one and feel left out if they dont. I think most adults can decide whether they can afford something and then it is down to priorities, trouble with money is you can only spend it once.
I know how my finances work, would be interesting to see how other people work things. I dont owe a penny but for now I am driving a 1 litre Citroen, sometimes I wonder who is the daft one as if the whole s
thouse does come crashing down we all end up screwed but the ones that brought it about at least had nice new cars and more holidays !
Savings dont earn you anything and you are going to die anyway !
It seems to work for a lot of people but I do wonder how many are stretching their finances to have the use of an Evoque or similar on a fairly low salary.
I think in the past lower earners would assume that car is for people with money, but they now have a route into one and feel left out if they dont. I think most adults can decide whether they can afford something and then it is down to priorities, trouble with money is you can only spend it once.
I know how my finances work, would be interesting to see how other people work things. I dont owe a penny but for now I am driving a 1 litre Citroen, sometimes I wonder who is the daft one as if the whole s
thouse does come crashing down we all end up screwed but the ones that brought it about at least had nice new cars and more holidays !Savings dont earn you anything and you are going to die anyway !
J4CKO said:
I know how my finances work, would be interesting to see how other people work things. I dont owe a penny but for now I am driving a 1 litre Citroen, sometimes I wonder who is the daft one as if the whole sthouse does come crashing down we all end up screwed but the ones that brought it about at least had nice new cars and more holidays !
Savings dont earn you anything and you are going to die anyway !
Currently going through this at the moment on an Evoque (yeah, I know, school run mummy thouse does come crashing down we all end up screwed but the ones that brought it about at least had nice new cars and more holidays !Savings dont earn you anything and you are going to die anyway !
) with a 12k car to trade in.Leasing free's up 9k of the current cars capital and get her a new Evoque
p/x'ing and getting a loan for the balance get's her a slightly higher spec 6 months old car
The monthly costs are similar and the overall total cost depends on the value of the car after 4 years, my estimation will be buying may be of benefit by 2-4k over 4 years.
I don't think lease, PCP, etc are all bad, it just allows people to get into "nicer cars" without the huge capital outlay up front (much like mortgages)
It could happen that everyone starts defaulting on agreements, as anyone in Aberdeen knows* but that would require some external economic driver, like the oil price crashing, or Brexit maybe, in which case there will already be bigger things to worry about.
It seems to me that good lease deals are like unicorns. The vast, vast majority of offers I've found are roughly 45% of the value of the car over 3 years, or exactly what you'd expect it to depreciate by. Unless you jump on a stock car discounted deal (also available on new car sales), and don't choose your own spec or colour, and don't need to do more than 8k miles, there are no bargains out there that can't be accounted for by the bulk savings the finance companies get. I mean, we all know a £30k car doesn't cost £30k to make, so even a perceived 10% difference between the GFV and our own market expectations doesn't mean the finance company is underwater by 10% on hundreds of thousands of cars. They're probably still in profit at that.
PHers are probably more clued up than average on the best "deals". Many people will simply pay the going rate for depreciation, with a poor interest rate on top of that, and from what I can see the going rates on most leasing websites are not a particularly cheap way to own a car.
And as somebody has done the sums on the number of used cars floating around, 8% per year entering the market doesn't actually seem like there's a flood of missing vehicles after all.
If leasing was such a cheap way to own a car, then there wouldn't be all the debate on here. There would be a clear winner one way or the other. And as we all know from every leasing/buying debate ever, there is no clear winner. So it can't be that cheap, can it? So there can't be a problem, can there?
* hundreds, if not thousands, of tasteless white Audis handed back to the dealer when the oil price crashed and 150,000 jobs vanished.
It seems to me that good lease deals are like unicorns. The vast, vast majority of offers I've found are roughly 45% of the value of the car over 3 years, or exactly what you'd expect it to depreciate by. Unless you jump on a stock car discounted deal (also available on new car sales), and don't choose your own spec or colour, and don't need to do more than 8k miles, there are no bargains out there that can't be accounted for by the bulk savings the finance companies get. I mean, we all know a £30k car doesn't cost £30k to make, so even a perceived 10% difference between the GFV and our own market expectations doesn't mean the finance company is underwater by 10% on hundreds of thousands of cars. They're probably still in profit at that.
PHers are probably more clued up than average on the best "deals". Many people will simply pay the going rate for depreciation, with a poor interest rate on top of that, and from what I can see the going rates on most leasing websites are not a particularly cheap way to own a car.
And as somebody has done the sums on the number of used cars floating around, 8% per year entering the market doesn't actually seem like there's a flood of missing vehicles after all.
If leasing was such a cheap way to own a car, then there wouldn't be all the debate on here. There would be a clear winner one way or the other. And as we all know from every leasing/buying debate ever, there is no clear winner. So it can't be that cheap, can it? So there can't be a problem, can there?
* hundreds, if not thousands, of tasteless white Audis handed back to the dealer when the oil price crashed and 150,000 jobs vanished.
TartanPaint said:
It seems to me that good lease deals are like unicorns. The vast, vast majority of offers I've found are roughly 45% of the value of the car over 3 years, or exactly what you'd expect it to depreciate by. Unless you jump on a stock car discounted deal (also available on new car sales), and don't choose your own spec or colour, and don't need to do more than 8k miles, there are no bargains out there that can't be accounted for by the bulk savings the finance companies get. I mean, we all know a £30k car doesn't cost £30k to make, so even a perceived 10% difference between the GFV and our own market expectations doesn't mean the finance company is underwater by 10% on hundreds of thousands of cars. They're probably still in profit at that.
PHers are probably more clued up than average on the best "deals". Many people will simply pay the going rate for depreciation, with a poor interest rate on top of that, and from what I can see the going rates on most leasing websites are not a particularly cheap way to own a car.
There are some poor deals for any form of financing a car, including a cash purchase.PHers are probably more clued up than average on the best "deals". Many people will simply pay the going rate for depreciation, with a poor interest rate on top of that, and from what I can see the going rates on most leasing websites are not a particularly cheap way to own a car.
But depreciation beating lease deals are aplenty and easy to spot. It doesn't take a genius, honestly (even I can see them!). The vast majority of people tend to do their due diligence and shop around.
Those deal may or may not be mirrored by cash deals. They're a smarter way for the manufacturers to discount than just cutting prices.
All this talk of it only cost me £6k over 2 yrs.
Well if you arent earning lots and especially if you have yet to buy your final home then you should be looking at making the £6k last at least 5 yrs if not more.
And stop allowing your brain to even think about brand new cars. It should be what is the most reliable very very used car can I buy.
Well if you arent earning lots and especially if you have yet to buy your final home then you should be looking at making the £6k last at least 5 yrs if not more.
And stop allowing your brain to even think about brand new cars. It should be what is the most reliable very very used car can I buy.
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