Are the wheels about to fall of car finance?
Discussion
NickCQ said:
liner33 said:
Most trade it against another new car so no they dont settle the finance any shortfall is added to the new finance deal
Is this right? I thought the idea with PCP at least was that the finance company is 'on risk' for the shortfall, so from the consumer perspective this deficit ceases to exists when the term expires. That's why they use the terminology 'optional final payment' - you always have the option to hand the car back and pay relevant excess mileage and condition charges with no liability for the value vs the outstanding finance. For the avoidance of doubt :-
=> If you sell your car for any reason - trading it in or otherwise - where there is equity its yours to keep, where the is negative equity you need to pay the balance / refinance it.
=> There is moreoften the opportunity to VT the car once you've paid 50% of the total amount payable including final balloon payment, interest, fees and deposit and have nothing further to pay (subject to fair wear and tear). This can often give the opportunity to "walk away" earlier than full term
=> You can VT the car at ANY point, however the finance company can pursue you for in total no more than 50% of the total amount payable including final balloon payment, interest, fees and deposit (subject to fair wear and tear)
=> If you do owe more than its worth, the simplest way is to wait until the end of the term and hand the car back. By that point it should have balanced itself out to maybe even a bit of equity, but if its worth less than the final balloon payment its the finance companys problem, not yours.
Will cheap car loans steer Britain to a financial crash?
https://www.theguardian.com/money/blog/2017/jul/08...
https://www.theguardian.com/money/blog/2017/jul/08...
ReverseTriker said:
That article is behind a paywall.ReverseTriker said:
Will cheap car loans steer Britain to a financial crash?
https://www.theguardian.com/money/blog/2017/jul/08...
Nohttps://www.theguardian.com/money/blog/2017/jul/08...
ReverseTriker said:
Will cheap car loans steer Britain to a financial crash?
https://www.theguardian.com/money/blog/2017/jul/08...
You've posted this one twice now..https://www.theguardian.com/money/blog/2017/jul/08...
Fckitdriveon said:
Done this many times as buyer and seller.
Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
Sure, but playing devil's advocate, once you've cleared the finance there's nothing to stop the seller from saying "thanks mate, now get off my property" and you'd have no choice but to pursue them through the courts for the cash. Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
I suppose it's theoretically no different to bank transferring the funds, but I feel less uncomfortable about that because there'll be a deposit visible in their account from mine with the label PAYMENT FOR FORD FOCUS A123XYZ or whathaveyou.
I've done PCP tradein to WBAC which I was happy with, but I'd be hesitant buying from a private seller, perhaps unjustifiably.
Venturist said:
Fckitdriveon said:
Done this many times as buyer and seller.
Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
Sure, but playing devil's advocate, once you've cleared the finance there's nothing to stop the seller from saying "thanks mate, now get off my property" and you'd have no choice but to pursue them through the courts for the cash. Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
I suppose it's theoretically no different to bank transferring the funds, but I feel less uncomfortable about that because there'll be a deposit visible in their account from mine with the label PAYMENT FOR FORD FOCUS A123XYZ or whathaveyou.
I've done PCP tradein to WBAC which I was happy with, but I'd be hesitant buying from a private seller, perhaps unjustifiably.
Same thing, surely?
Same with bank transfer, same with paying with cheque and waiting for it to clear?
All rely on a little bit of trust and due diligence.
Venturist said:
Fckitdriveon said:
Done this many times as buyer and seller.
Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
Sure, but playing devil's advocate, once you've cleared the finance there's nothing to stop the seller from saying "thanks mate, now get off my property" and you'd have no choice but to pursue them through the courts for the cash. Stick the kettle on, at your or sellers home, takes about an hour from start to finish , pay finance house the outstanding balance and the seller if any residual, drink tea as paperwork is filled out . Call back to finance company to get vehicle clearance . Shake hands. Thanks very much.
I suppose it's theoretically no different to bank transferring the funds, but I feel less uncomfortable about that because there'll be a deposit visible in their account from mine with the label PAYMENT FOR FORD FOCUS A123XYZ or whathaveyou.
I've done PCP tradein to WBAC which I was happy with, but I'd be hesitant buying from a private seller, perhaps unjustifiably.
As I said I've done it many times ranging from motorbikes (12-15k) as buyer and seller all the way through to premium cars (70k upwards).
Normal due diligence applies as with any private purchase , know whose coming to you home etc, I.d proofs etc but that 'feeling' out process starts long before anyone steps foot on my property or vice Versa.
I would say that certain cars do seem to attract a certain type of person, particularly when selling both my r35s , I made sure I had my pals round for a BBQ a couple of times, everyone's ex Reg or bootneck , so it sets the tone for no sillyness from the Outset. By far the majority I have done by myself though.
In general I wouldn't invite anyone I wasn't sure about in the first place.
Well back to the main topic. Some of you have unfortunately been taken in by the shock horror stories in the press, You have even linked here to them, which is just what they wanted 
They live in a binary world, where only bad news exists and the whole field of behavioural economics might never exist .
Time to look at things from a more holistic angle. First, does anyone think that the sort of people who PCP a car to boost their image will easily hand it back and admit they are a failure? I think it is more likely that they will cut down on other things to keep their outward sign of whtaever they are trying to project. On a macroeconomic scale the BOE don't actually have to anything to affect the behaviour of the banks and other financial institutions. They only need to send out 'signals' (threats in our world) and the lenders will fall into line. To use a Brexit analogy, a soft landing is more likely. Few borrowers default on their car loans, even a significant increase is unlikely to cause more than a ripple, and banks have a lot of commercial loans as well as individual ones to buffer any shock. Manufacturers are mainly based abroad so a downturn in one market doesn't have that much effect, and sales in the developing markets are growwing. If a world financial does actually happen, then I think that car loans would be amongst the least of worries in any case, even in the USA.
They live in a binary world, where only bad news exists and the whole field of behavioural economics might never exist . Time to look at things from a more holistic angle. First, does anyone think that the sort of people who PCP a car to boost their image will easily hand it back and admit they are a failure? I think it is more likely that they will cut down on other things to keep their outward sign of whtaever they are trying to project. On a macroeconomic scale the BOE don't actually have to anything to affect the behaviour of the banks and other financial institutions. They only need to send out 'signals' (threats in our world) and the lenders will fall into line. To use a Brexit analogy, a soft landing is more likely. Few borrowers default on their car loans, even a significant increase is unlikely to cause more than a ripple, and banks have a lot of commercial loans as well as individual ones to buffer any shock. Manufacturers are mainly based abroad so a downturn in one market doesn't have that much effect, and sales in the developing markets are growwing. If a world financial does actually happen, then I think that car loans would be amongst the least of worries in any case, even in the USA.
Justin Case said:
Few borrowers default on their car loans, even a significant increase is unlikely to cause more than a ripple, and banks have a lot of commercial loans as well as individual ones to buffer any shock.
Haven't read the thread, however...From memory I believe the BoE increased the counter-cyclical buffer rate to 0.5% citing unsecured and auto lending as main factors.
"Wells Fargo trims auto loans as market cools, risk overhaul kicks in"
https://www.reuters.com/article/us-wells-fargo-aut...
https://www.reuters.com/article/us-wells-fargo-aut...
GregK2 said:
"Wells Fargo trims auto loans as market cools, risk overhaul kicks in"
https://www.reuters.com/article/us-wells-fargo-aut...
I imagine the market in the US could be a nightmare. I'm out of touch with it now, but it used to be that new cars were very cheap but used prices high (both compared to UK). So what they call personal leasing there (which in practice is more like our PCP) is often astonishingly cheap. That'll get completely messed up if residuals fall.https://www.reuters.com/article/us-wells-fargo-aut...
Sheepshanks said:
GregK2 said:
"Wells Fargo trims auto loans as market cools, risk overhaul kicks in"
https://www.reuters.com/article/us-wells-fargo-aut...
I imagine the market in the US could be a nightmare. I'm out of touch with it now, but it used to be that new cars were very cheap but used prices high (both compared to UK). So what they call personal leasing there (which in practice is more like our PCP) is often astonishingly cheap. That'll get completely messed up if residuals fall.https://www.reuters.com/article/us-wells-fargo-aut...
Its whether it all ends with a bang or a whimper... this article suggests the latter.
cuprabob said:
That article is behind a paywall.
With FT links , google the title of the artice & you will usually be able to read it from another link in the google search "Bank of England warns of complacency over big rise in personal debt Banks, credit card companies and car loan providers told they face action against reckless lending "
https://www.theguardian.com/business/2017/jul/24/b...
ReverseTriker said:
With FT links , google the title of the artice & you will usually be able to read it from another link in the google search
"Bank of England warns of complacency over big rise in personal debt Banks, credit card companies and car loan providers told they face action against reckless lending "
https://www.theguardian.com/business/2017/jul/24/b...
"Bank of England warns of complacency over big rise in personal debt Banks, credit card companies and car loan providers told they face action against reckless lending "
https://www.theguardian.com/business/2017/jul/24/b...
BOE said:
The past decade has seen the number of cars bought with a personal contract purchase (PCP) plan – under which the car is effectively leased – increase from one in five to four in five. Companies risk losing money if used car prices fall and Brazier said banks involved and the shareholders of car companies would “want to think very carefully about the risks”.
Surely that must be consumer sales only? Or are business leases now PCP type things?TooLateForAName said:
ReverseTriker said:
With FT links , google the title of the artice & you will usually be able to read it from another link in the google search
"Bank of England warns of complacency over big rise in personal debt Banks, credit card companies and car loan providers told they face action against reckless lending "
https://www.theguardian.com/business/2017/jul/24/b...
"Bank of England warns of complacency over big rise in personal debt Banks, credit card companies and car loan providers told they face action against reckless lending "
https://www.theguardian.com/business/2017/jul/24/b...
BOE said:
The past decade has seen the number of cars bought with a personal contract purchase (PCP) plan – under which the car is effectively leased – increase from one in five to four in five. Companies risk losing money if used car prices fall and Brazier said banks involved and the shareholders of car companies would “want to think very carefully about the risks”.
Surely that must be consumer sales only? Or are business leases now PCP type things?Only real risk for lenders is if tax rules change hitting their profits/margin.
Gassing Station | General Gassing | Top of Page | What's New | My Stuff