New Cars and 0.5% Bank Rate
Discussion
On the 8th of January the Bank of England decided to keep the base rate at 0.5%, it has been there since 5th March 2009.
So, how big a factor has new car sales through low interest PCP deals been on aiding the growth of the economy....
I too were among thousands who bought a new car last year through PCP finance with only my trade in and dealer contribution as deposit. However, if in a few years the base interest rate rises to 4-5% then it will just be unviable for some to buy a car heavily financed and I think it will become a shock as to how expensive credit will be.
So, how big a factor has new car sales through low interest PCP deals been on aiding the growth of the economy....
I too were among thousands who bought a new car last year through PCP finance with only my trade in and dealer contribution as deposit. However, if in a few years the base interest rate rises to 4-5% then it will just be unviable for some to buy a car heavily financed and I think it will become a shock as to how expensive credit will be.
It's one of many factors that will be considered with any rate rise, mortgages being another key one of course. The BoE have made it quite clear though that they foresee a 2-3% BR as the new norm, not the 4-5% that you mention, so like many others, I'm expecting the rate to creep up to that value once there's sign of a recovery, but tentatively at first, so we could be five years off it reaching 2%, even with a pessimistic view. Even once we reach that BoE target of normality at 2-3% BR, whilst car finance at another 1.5% to 2.5% more than we currently have will seem a lot more expensive, it is far more historically normal than the current situation! I suspect other areas of the car industry might benefit though, such as secondhand cars or car parts and independent servicing?
RobM77 said:
It's one of many factors that will be considered with any rate rise, mortgages being another key one of course. The BoE have made it quite clear though that they foresee a 2-3% BR as the new norm, not the 4-5% that you mention, so like many others, I'm expecting the rate to creep up to that value once there's sign of a recovery, but tentatively at first, so we could be five years off it reaching 2%, even with a pessimistic view. Even once we reach that BoE target of normality at 2-3% BR, whilst car finance at another 1.5% to 2.5% more than we currently have will seem a lot more expensive, it is far more historically normal than the current situation! I suspect other areas of the car industry might benefit though, such as secondhand cars or car parts and independent servicing?
Did they say why they foresee it at 2-3%, I just used a rough average to get the 4-5%.Yes, well the current situation probably explains why so many people have new cars, it was cheaper for me to buy new rather than used or nearly new becuase of lower rates through PCP, which stems from the base rate. Like you mentioned though, an increase on interest payments on a mortagage is going to scare people more than not being able to afford a new car.
I wouldn't have financed a new car if it wasn't for the low rates as I just don't think I couldt stomach looking at how much the credit costs.
neil1jnr said:
Did they say why they foresee it at 2-3%, I just used a rough average to get the 4-5%.
Yes, the governor of the Bank of England started saying this last summer:http://www.independent.co.uk/money/mortgages/mark-...
Article said:
Mr Carney suggested that rates would stabilise around the level of 2.5 per cent rather than returning to their previous norm of about five per cent.
A relevant statistic might be Japan's base rate which has been stuck on or just above 0% for the last 20 years. The trigger and continuing driver for this is the kind of 'stagflation' we in Europe now find ourselves mired in.
It's probably the only relevant real-world illustration of what we might expect in terms of base rates in the coming years, unless by some miracle our political masters figure a way to rebalance the country's economy and radically increase equality.
It's probably the only relevant real-world illustration of what we might expect in terms of base rates in the coming years, unless by some miracle our political masters figure a way to rebalance the country's economy and radically increase equality.
Greengecko said:
The bigger question is when will interest rates rise? It's forever being put back, with 2016 now the earliest target date.
Still got a bit of time to finance new cars and fix mortgages then.
with the EU in such a mess, china's figures looking worrying even 2016 maybe optimistic Still got a bit of time to finance new cars and fix mortgages then.
Dave Hedgehog said:
with the EU in such a mess, china's figures looking worrying even 2016 maybe optimistic
The EU is in a very bad way. The idea that a single monetary policy for multiple countries could ever work is somewhat doubtful.China's growth has slowed but it did slightly better than expected this month, and a growth rate of over 7% really isn't sending too many alarm bells.
loudlashadjuster said:
A relevant statistic might be Japan's base rate which has been stuck on or just above 0% for the last 20 years. The trigger and continuing driver for this is the kind of 'stagflation' we in Europe now find ourselves mired in.
It's probably the only relevant real-world illustration of what we might expect in terms of base rates in the coming years, unless by some miracle our political masters figure a way to rebalance the country's economy and radically increase equality.
It's almost impossible to compare the economy of Japan to the EU or UK.It's probably the only relevant real-world illustration of what we might expect in terms of base rates in the coming years, unless by some miracle our political masters figure a way to rebalance the country's economy and radically increase equality.
I agree, if the Euro is to stay as it is, with no exits then the EU could potentially go for a considerable amount of time at a very low interest rate. However, this simply won't happen in the UK, because of various economic factors.
Greengecko said:
It's almost impossible to compare the economy of Japan to the EU or UK.
I agree, if the Euro is to stay as it is, with no exits then the EU could potentially go for a considerable amount of time at a very low interest rate. However, this simply won't happen in the UK, because of various economic factors.
Point taken, but it's the only real precedent we've got.I agree, if the Euro is to stay as it is, with no exits then the EU could potentially go for a considerable amount of time at a very low interest rate. However, this simply won't happen in the UK, because of various economic factors.
Gassing Station | General Gassing | Top of Page | What's New | My Stuff