Car credit hits £58bn out of total consumer credit of £200bn
Discussion
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.
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.
akirk said:
V8 FOU said:
Credit secured on depreciating asset etc, blah, blah.
at least it is secured on an asset, what is the comparison for unsecured debt (e.g. credit cards?)
Yipper said:
£58B is a drop in the bucket of Britain's £1.6T consumer credit mountain. Less than 4% of total debt. Hardly worth worrying about.
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.
Is PCP lending or rental? I think the radio ads say, 'you will not own the car, blah blah blah'. I suppose what happens when an individual defaults is the question. Do they just seize the vehicle and then pursue for the difference in value? Could be more of a corporate liability than individual.
Every day I see yet another 50 white or M3 blue 1 series and think, BM has pulled a marketing and finance blinder here. But when does it sarurate and even if a new equilibrium is found it must be at a rate lower than this current ramp up.
I've also thought, what were all these PCP drivers in before? Beat up old Astras or something I assume. Car ownership has certainly undergone a gentrification in the last few years.
Every day I see yet another 50 white or M3 blue 1 series and think, BM has pulled a marketing and finance blinder here. But when does it sarurate and even if a new equilibrium is found it must be at a rate lower than this current ramp up.
I've also thought, what were all these PCP drivers in before? Beat up old Astras or something I assume. Car ownership has certainly undergone a gentrification in the last few years.
joeshaw123 said:
Yipper said:
£58B is a drop in the bucket of Britain's £1.6T consumer credit mountain. Less than 4% of total debt. Hardly worth worrying about.
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.
Mortgages + loans + overdrafts + credit cards etc.
Car debt is just a tiny portion of total debt. There is no car-debt crisis. It is just the press stirring the pot for clickbait.
nickfrog said:
DJT said:
I've also thought, what were all these PCP drivers in before? Beat up old Astras or something I assume
I don't understand the rationale behind your assumption.Yipper said:
It is consumer credit.
Mortgages + loans + overdrafts + credit cards etc.
Car debt is just a tiny portion of total debt. There is no car-debt crisis. It is just the press stirring the pot for clickbait.
Ah ok. So c.£1.4T mortgage debt and £200B unsecured. I don't think £50B is a huge amount, I just keep thinking there's got to be a saturation point where sales dip but the industry just keeps growing!Mortgages + loans + overdrafts + credit cards etc.
Car debt is just a tiny portion of total debt. There is no car-debt crisis. It is just the press stirring the pot for clickbait.
Given that cars are, apart from houses, the most expensive things that the overwhelming majority of the population will ever spend money on, then I find the 58Bn figure neither surprising nor particularly worrying.
For a start an awful lot of those cars will be bread and butter models that people are using to get to work - people who probably don't want the aggro of running a "shed" or something out of warranty. It's not all white Evoques and 1 series BMWs, you know.
For a start an awful lot of those cars will be bread and butter models that people are using to get to work - people who probably don't want the aggro of running a "shed" or something out of warranty. It's not all white Evoques and 1 series BMWs, you know.
DJT said:
Is PCP lending or rental? I think the radio ads say, 'you will not own the car, blah blah blah'.
PCP is a loan secured on the car, in pretty much the same way as HP.The ads that you refer to are most likely for leasing (PCH), where you won't own the car during or after the lease term.
TartanPaint said:
What the hell do they do with all the cars which are handed back? Are there parking lots full of 3 year old, 24k mile cars somewhere? They don't seem to be on the market in sufficient quantity to account for all the new cars sold. That's just gut feel, I have no data.
This is what confuses me, in particular the 3 year old, 60k mile former fleet VAG/BMW/Mercs. Like I said in my previous post, over half of the 2.5M car sales are fleet so thats 1.3M fleet cars most likely getting handed back in 3 years time. Where do they all go?!TartanPaint said:
What the hell do they do with all the cars which are handed back? Are there parking lots full of 3 year old, 24k mile cars somewhere? They don't seem to be on the market in sufficient quantity to account for all the new cars sold. That's just gut feel, I have no data.
I wonder the same. They've sold about 15,000 Golf R mostly on 2/3 year leases and PCPs and there is less of them on Autotrader than say something like a Focus RS. They aren't old enough and sold much less. Where are they going?
I wondered the same question about where the hell do these cars end up!
On the face of, the stat is not alarming. After the house, the car is normally the second biggest purchase. And it is secured - they simply take the car back.
But if they have to take lots of cars back, that's where the problem builds. I'm sure there will be a new way for government to chuck the hot potato though.
On the face of, the stat is not alarming. After the house, the car is normally the second biggest purchase. And it is secured - they simply take the car back.
But if they have to take lots of cars back, that's where the problem builds. I'm sure there will be a new way for government to chuck the hot potato though.
joeshaw123 said:
TartanPaint said:
What the hell do they do with all the cars which are handed back? Are there parking lots full of 3 year old, 24k mile cars somewhere? They don't seem to be on the market in sufficient quantity to account for all the new cars sold. That's just gut feel, I have no data.
This is what confuses me, in particular the 3 year old, 60k mile former fleet VAG/BMW/Mercs. Like I said in my previous post, over half of the 2.5M car sales are fleet so thats 1.3M fleet cars most likely getting handed back in 3 years time. Where do they all go?!Second thread on the subject in the matter of a few months. There's no doubt that there's a bubble about to burst, and the artificially inflated GFV figures on leases cannot be sustained when a small interest rise rate pushes loads of people over the tipping point and they have to get out of their car loans and lease deals early.
Maybe it is a tactic - catch them at the other end by selling them one of the 'nearly new' cars that the retailers have been stockpiling to prevent the market being saturated and avoid a collapse in used values?!?!
Maybe it is a tactic - catch them at the other end by selling them one of the 'nearly new' cars that the retailers have been stockpiling to prevent the market being saturated and avoid a collapse in used values?!?!
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