Are the wheels about to fall of car finance?
Discussion
Ares said:
Fiddly-Dee said:
daemon said:
You cant artificially control the prices though at auction?
Is that strictly true though? Manufacturers can send tame dealers into auction, with a pot-load of "marketing" cash, to artificially bid up the price of sold cars, thereby keeping up the perceived residual values and, by extension, the second-hand prices of their cars. Too much gloom and doom I think. Rises in bank rates are often more aimed at giving a signal to the markets than greatly affecting the actual rates that borrowers pay (or savers get). Increasing the bank rate to 1% even would not make a lot of difference to someone paying 5% on a PCP. Also, do you think that people who have had a new Audi on a PCP will suddenly move to a secondhand Kia Picanto? My view is that they will stretch themselves a a bit more to keep the sort of car that they are used to. Similarly the newish cars sold with a manufacturer backed guarantee and finance should continue to sell well, they tend to be more economical and have low VED, which makes them attractive even if you have to borrow to buy them..
What I think more likely is that there will be a collapse at the bottom end of the market, where cars are more expensive to run and credit is less easy to obtain. In fact I will be surprised if any cars like the Vectra or Mk 3 Mondeo will be on the road in three years time, as they wil be undesirable, worthless and not worth repairing when they go wrong. No, we will all be driving around in Golfs, Fiestas and the like and still maintaining our standard of living otherwise
What I think more likely is that there will be a collapse at the bottom end of the market, where cars are more expensive to run and credit is less easy to obtain. In fact I will be surprised if any cars like the Vectra or Mk 3 Mondeo will be on the road in three years time, as they wil be undesirable, worthless and not worth repairing when they go wrong. No, we will all be driving around in Golfs, Fiestas and the like and still maintaining our standard of living otherwise
Ares said:
Fiddly-Dee said:
daemon said:
You cant artificially control the prices though at auction?
Is that strictly true though? Manufacturers can send tame dealers into auction, with a pot-load of "marketing" cash, to artificially bid up the price of sold cars, thereby keeping up the perceived residual values and, by extension, the second-hand prices of their cars. Edited by daemon on Tuesday 27th June 16:28
However, to be able to sit on unsold stock you need a healthy balance sheet. So you get a 'perfect storm' in the used market where increasing supply intersects with dropping demand, with the usual result.
I just can't see 2008 happening again though, - the car finance market is just too small to crash the economy and the banking system appears to be more effectively regulated in liquidity and solvency these days. Famous last words.
Ares said:
Fiddly-Dee said:
daemon said:
You cant artificially control the prices though at auction?
Is that strictly true though? Manufacturers can send tame dealers into auction, with a pot-load of "marketing" cash, to artificially bid up the price of sold cars, thereby keeping up the perceived residual values and, by extension, the second-hand prices of their cars. Edited by daemon on Tuesday 27th June 16:28
Most contributors to this thread would accept that both new and used car markets in the UK are heavily manipulated, the arguments stem around the mechanisms by which this manipulation is effected.
In spite of all of this, the UK continues to enjoy some of the cheapest new and (especially) used cars in the World.
Justin Case said:
Too much gloom and doom I think. Rises in bank rates are often more aimed at giving a signal to the markets than greatly affecting the actual rates that borrowers pay (or savers get). Increasing the bank rate to 1% even would not make a lot of difference to someone paying 5% on a PCP. Also, do you think that people who have had a new Audi on a PCP will suddenly move to a secondhand Kia Picanto? My view is that they will stretch themselves a a bit more to keep the sort of car that they are used to. Similarly the newish cars sold with a manufacturer backed guarantee and finance should continue to sell well, they tend to be more economical and have low VED, which makes them attractive even if you have to borrow to buy them..
What I think more likely is that there will be a collapse at the bottom end of the market, where cars are more expensive to run and credit is less easy to obtain. In fact I will be surprised if any cars like the Vectra or Mk 3 Mondeo will be on the road in three years time, as they wil be undesirable, worthless and not worth repairing when they go wrong. No, we will all be driving around in Golfs, Fiestas and the like and still maintaining our standard of living otherwise
Yes. But it could affect the 2-3% deals!What I think more likely is that there will be a collapse at the bottom end of the market, where cars are more expensive to run and credit is less easy to obtain. In fact I will be surprised if any cars like the Vectra or Mk 3 Mondeo will be on the road in three years time, as they wil be undesirable, worthless and not worth repairing when they go wrong. No, we will all be driving around in Golfs, Fiestas and the like and still maintaining our standard of living otherwise
Sa Calobra said:
On the news from the BOE, consumer debt has ramped up over the last year. A sign people are struggling to pay their monthly outgoings and using a credit card to temporarily supliment bills?
Exactly The worry is not your average member on here who enjoys owning a car and will borrow with what they can afford to enjoy the car they want .The huge number of people that are borrowing to pay the rent and mortgage dont come on here
VGTICE said:
When the market collapses the deals on used car market will be amazing, scrap metal kind of deals - after all they've produced and sold so many cars over the recent years when the sauce runs out and the low end isn't willing to buy overpriced used tat they'll either have to sell them on cheaply, export them, or scrap them. Or store them on huge disused airports waiting for market to pick up, which might take a while reducing the value of held stock even further.
You keep using the term "collapses" , I dont believe it will collapse it will evolve into something that looks different to how it is now like how the mortgage industry has changed sinced the 80's If new deals become less attractive people will simply keep their cars longer, used values will increase and finance deals will be more weighted for used stuff ie like the market is in other European countries
Of course should the car market slow down significantly there will no doubt be a government sponsored diesel scrappage scheme to support sales
CivBrum said:
Interest rates aren't that cheap for everyone, remember. I have a decent salary and a decent credit score, yet the interest rate on my personal loan is 6.9%. Some had quoted me as high as 14% even though their advertised rates were 3%. I think a lot of people in the sub-prime end of the market will be taking out auto loans with high interest rates (though admittedly, it is easier to get the lower rates on a new car than it is when taking out an unsecured loan for a used car - I am sure I would have got 0-3% if I PCP'd a brand new car).
Which is where I don't the the low rates are funding the wrong kind of growth to a massive degree.My current car is at 1.9% through BMW FS. The incoming one is business lease so not relevant, but the deal is better ;-)
Ares said:
I genuinely don't think it is the same thing.
Taking the opportunity of cheaper finance to get a better car is fine, and I am quite sure happens. I don't believe people are consciously using cheap finance to pay monthly living costs.
I think many many more folks than you think are indeed using cheap credit to pay monthly living costs.Taking the opportunity of cheaper finance to get a better car is fine, and I am quite sure happens. I don't believe people are consciously using cheap finance to pay monthly living costs.
katz said:
Ares said:
I genuinely don't think it is the same thing.
Taking the opportunity of cheaper finance to get a better car is fine, and I am quite sure happens. I don't believe people are consciously using cheap finance to pay monthly living costs.
I think many many more folks than you think are indeed using cheap credit to pay monthly living costs.Taking the opportunity of cheaper finance to get a better car is fine, and I am quite sure happens. I don't believe people are consciously using cheap finance to pay monthly living costs.
CivBrum said:
Interest rates aren't that cheap for everyone, remember. I have a decent salary and a decent credit score, yet the interest rate on my personal loan is 6.9%. Some had quoted me as high as 14% even though their advertised rates were 3%. I think a lot of people in the sub-prime end of the market will be taking out auto loans with high interest rates (though admittedly, it is easier to get the lower rates on a new car than it is when taking out an unsecured loan for a used car - I am sure I would have got 0-3% if I PCP'd a brand new car).
6.9%!Phew!
I get about .75% on cash deposits.
No wonder my arse feels sore most of the time these days
55palfers said:
CivBrum said:
Interest rates aren't that cheap for everyone, remember. I have a decent salary and a decent credit score, yet the interest rate on my personal loan is 6.9%. Some had quoted me as high as 14% even though their advertised rates were 3%. I think a lot of people in the sub-prime end of the market will be taking out auto loans with high interest rates (though admittedly, it is easier to get the lower rates on a new car than it is when taking out an unsecured loan for a used car - I am sure I would have got 0-3% if I PCP'd a brand new car).
6.9%!Phew!
I get about .75% on cash deposits.
No wonder my arse feels sore most of the time these days
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