Are the wheels about to fall of car finance?
Discussion
silentbrown said:
ndeed. (that was what I meant by "if you're a savvy cash buyer")
There are plenty of good reason to own outright: You can do what you want with the car - modify it, paint it pink, fit a cage and go racing, do as much mileage as you need without worry, you get the warm glow of it actually belonging to you - plus with the crap interest rates on savings at the moment you're not losing out on much savings interest...
But I know there's equally good reasons not to own outright. Concerns about depreciation, maintenance costs on older vehicles. And outright purchase just isn't an option for many people. And, occasionally there are leasing deals so good you'd be mad to do anything else.
There are plenty of good reason to own outright: You can do what you want with the car - modify it, paint it pink, fit a cage and go racing, do as much mileage as you need without worry, you get the warm glow of it actually belonging to you - plus with the crap interest rates on savings at the moment you're not losing out on much savings interest...
But I know there's equally good reasons not to own outright. Concerns about depreciation, maintenance costs on older vehicles. And outright purchase just isn't an option for many people. And, occasionally there are leasing deals so good you'd be mad to do anything else.
I can see nobody's yet told you that having a sensible balanced view such as this isn't going to get you very far on threads like this
silentbrown said:
Actually,this *is* almost 100% wrong.
The finance house isn't paying you anything for the car because it's theirs, not yours. At the end of a PCP, you've repaid all the capital except the GMFV/Balloon/Final Payment - the terms all mean the same thing.
Now, you can pay the GMFV/Balloon and own the car, or NOT pay it and return it (assuming it's in decent nick)
Finance companies set the GMFV *LOW* not high, so the actual market/trade-in value of the car is hopefully more than the GMFV. If you want to take on another PCP, what effectively happens is that the you buy the car outright for the GMFV and immediately trade it in for a higher value. The difference (if there is one) means you have money to put down as a deposit.
However, the low GMFV means you've got to pay off more capital, so higher monthly payments. A higher GMFV means lower monthlies, but you'll have less "equity" in the car when the PCP expires.
Thanks for explaining. We're saying the same thing but I've got my terms all wrong The finance house isn't paying you anything for the car because it's theirs, not yours. At the end of a PCP, you've repaid all the capital except the GMFV/Balloon/Final Payment - the terms all mean the same thing.
Now, you can pay the GMFV/Balloon and own the car, or NOT pay it and return it (assuming it's in decent nick)
Finance companies set the GMFV *LOW* not high, so the actual market/trade-in value of the car is hopefully more than the GMFV. If you want to take on another PCP, what effectively happens is that the you buy the car outright for the GMFV and immediately trade it in for a higher value. The difference (if there is one) means you have money to put down as a deposit.
However, the low GMFV means you've got to pay off more capital, so higher monthly payments. A higher GMFV means lower monthlies, but you'll have less "equity" in the car when the PCP expires.
ashleyman said:
Even on a PCP, that £2k difference is still less than what I would have had to have paid if I didn't take a PCP out.
My car was £30k on a VWFS PCP. I also got £1250 deposit contribution so you could saw the car only cost me £28.5k.
If I wanted to walk in and pay either on cash, credit card or on a loan I would have had to find £32,500 to buy the car because they simply did not discount the car for cash buyers. This was in January 2016 and I'm just going by the figures I have in my book.
I actually did a Car-Wow for a facelift R today. Why would I pay cash?
Cash buyer however could take the PCP deal to maximise the discount, then settle it immediately after delivery.My car was £30k on a VWFS PCP. I also got £1250 deposit contribution so you could saw the car only cost me £28.5k.
If I wanted to walk in and pay either on cash, credit card or on a loan I would have had to find £32,500 to buy the car because they simply did not discount the car for cash buyers. This was in January 2016 and I'm just going by the figures I have in my book.
I actually did a Car-Wow for a facelift R today. Why would I pay cash?
ashleyman said:
I don't really think that individual consumers are at fault for the market issues though. Like I said, it's not up to consumers to make sure the deals they're getting make financial sense to the manufacturers and finance houses. If a deals a deal, people will take it.
That's the point though. The deals make perfect sense to the manufacturers because they're making money hand over fist. That's why they won't give deals for "cash" any more.Obviously the good burghers of PH aren't horribly over stretched, but plenty of people are. They've been sold the idea that the monthly figure that would have got them a used car will now get them something new, but they've been persuaded to forget that the used car would have a value to them at the end of the term.
They're basically paying twice what they used to.
(And yes they get to drive round in a new car, but for the most part they wouldn't normally because they couldn't afford it. They still can't, but the figures have been fudged to make it look like they can.)
daemon said:
TA14 said:
DonkeyApple said:
And it, The industry, was bailed out by the tax payers, we had soft loans to keep the manufacturers afloat, we had scrappage schemes to get consumers to buy new cars and we slammed interest rates to the floor to prevent consumers from defaulting on their agreements.
A mere blip then 
The interest rate drops were because of the PROPERTY market
The scrappage schemes were to jump start the ECONOMY not help the manufacturers
The big bailouts went to big American manufacturers who were weak and floundering anyway.
The likes of BMW, Merc, Audi adapted and subsequently thrived. Just as they will if similar happens again.
And yes, it was a mere blip on their profit margins for a couple of years. There was carnage in the property and mortgage markets, and a global recession, but no long term pain for most of the motor manufacturers.
Edited by daemon on Monday 7th August 15:04
Edited by daemon on Monday 7th August 15:05
daemon said:
DonkeyApple said:
This thread is specifically focused on car finance? Correct. And as such it very clearly includes the events which may lead to an issue with car finance!!
There are issues with car finance in the UK and thats whats being discussed, however you're trying to bring in further global issues with finance - to which none of us have the answer anyway? DonkeyApple said:
We do know - theres no direct relationship. We cant say "people with car finance have high levels of credit card debt" or "people with credit card debt have car finance".
OK, please cite your proof that there is no direct relationship, that the entire market of car financing is wholly and undeniably disparate from all other retail finance.
I didnt say that - i said there was no direct link. We can debate the nuances of any sort of impact or overlap, but we clearly cant say "everyone who has finance has credit card debt", not can we say "everyone who has credit card debt has their car on finance" so theres no direct link.OK, please cite your proof that there is no direct relationship, that the entire market of car financing is wholly and undeniably disparate from all other retail finance.
Theres an indirect link, but not a direct link.
DonkeyApple said:
And it is not about 'walking away with no obligations'. I was quite clear in my observation that it is about degrees of accountability. I made no statement. I merely highlighted that when people enter into credit default they will always cherry pick the agreements to default on or surrender first until they reach the point of total capitulation. If car credit is easier to extricate oneself from than credit card debt or zero finance deals or nothing to pay deals then it will be among the first liabilities to be cut.
And again - you're going down this doom and gloom route where people are going to end up having to chose which debt to default on. It might happen to some people, and some of those people might then VT their car or hand it back. Whoopey doop doop. It'll be a small minority of transactions that happens to.DonkeyApple said:
And this bit, I'm afraid is pure bonkers: There was quite a heavy market crash in the car market because of the last recession back in 2008 / 2009 / 2010 and it was merely a downwards blip on manufacturers profits in the grand scheme of things. Some people VT'd cars, some people who otherwise might have kept them / traded them in, handed them back at the end of term.
The industry was bailed out by the tax payers, we had soft loans to keep the manufacturers afloat, we had scrappage schemes to get consumers to buy new cars and we slammed interest rates to the floor to prevent consumers from defaulting on their agreements.
Your attempt to re-write such recent history is utter madness.
We "slammed interest rates to the floor" because of the housing crisis, NOT because of the motor trade.The industry was bailed out by the tax payers, we had soft loans to keep the manufacturers afloat, we had scrappage schemes to get consumers to buy new cars and we slammed interest rates to the floor to prevent consumers from defaulting on their agreements.
Your attempt to re-write such recent history is utter madness.
And there you go all "global" again - it was GM, Chrysler and Ford because of the American market who were predominantly bailed out? What happened here in the UK?
The scrappage scheme was used to stave off redundancies and to try to jump start the economy. The car manufacturers didnt need it - it wasnt done for their benefit - and they'd have survived it anyway.
Have a read at this report about BMW from just after the recession in 2010.
http://www.cbsnews.com/news/recession-in-the-rearv...
It doesnt describe a company in carnage does it?
And heres one for Mercedes a year later....
https://www.theguardian.com/business/2011/apr/29/d...
The strong companies adapted and subsequently thrived. The weak ones - who were weak anyway - floundered.
It's the whole macro economic situation of the entire consumer debt market and the global macro economic scenario of rising rates which has triggered the entire concern with regards to car related debt.
Keeping on trying to say that car debt has nothing to do with the specific situation that is causing the issue with car debt is madness.
And people might not default on their debt? Again what planet are you on? They already are and rates haven't even moved and you are trying to advocate that when debt does become more extremely endive that people won't be defaulting? And are you seriously trying to argue that people aren't selective in the default process.
Again you are wilfully ignoring facts in some insane head in the ground mania.
This isn't your world of 'samples of one' but just basic facts and science.
And you're re-writing of history in regards to the motor industry over 2009 is utter lunacy.
While we may agree that the individual consumer is not at risk from loss on their debt secured against vehicle usage in the U.K., this was established many, many pages ago and we have been discussing the various nuances of what is at risk should the manufacturers lose control over near term used values, should lenders reduce their book growth on the industry or should rates finally rise.
But your need to fragrantly try and re-write history and to repeatedly ignore facts and to make wild statements with no supporting evidence almost smacks of a guy trying to live with the guilt of conning hundreds of people into unsuitable debt deals so as to shift some cars and earn some dirty money?
FN2TypeR said:
Ares said:
Cross-posted from another thread, my last and new car:
I'm just coming out of a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My new is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
All irrelevant, you didn't pay cash ergo you are a PAYE, debt slave prole and the Pistonheads massive has every right to laugh at you and your hilarious financial situationI'm just coming out of a 640d GC. Bought brand new, it costs me £561/mth and I put £4,000 down. This was on a 4 year PCP (12k/yr - currently 3yrs 3 months in). The current settlement figure is £22k and the car is worth somewhere between £25-27k.
That means, to date, it has cost me just under £26k for 39 months. If I sell it tomorrow, I'll get £3-5k 'back'.
If I'd bought it brand new, and sold it tomorrow, it would have dropped a lot more than £26k in that 3yrs 3 months, let alone the net £21-23k.
It's also been risk free, and a fixed outgoing.
My new is being leased. £65k Alfa Quadrifoglio, again over 4 yrs, but at 15,000 per year. £572/mth, £1,700 upfront, and includes RFL for the duration.
Over the 4 years, 60,000 miles it will cost me £29,156. Even with the best deals available, a £65k Alfa will easily lose £29k (44%) of it's value over 4 years and 60,000. And that's before you factor in £1800 of RFL that the private buyer will also have to pay for.
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
I suppose you'll come away with some clap trap like "it suits my finances, lifestyle and works for me next"
I just don't spend more money than I need to.
ashleyman said:
NickCQ said:
ashleyman said:
I actually did a Car-Wow for a facelift R today. Why would I pay cash?
You missed out the key piece of information - what's the interest rate on the PCP?Brave Fart said:
Ares said:
lots of numbers
On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
Two things, Ares:On top of all of those, my investments over the last 3 years have risen by 20-25%. So tell me again why I would tie my capital up in a car for no commercial reason...and with significant Opportunity Cost??
1) your investments are (presumably) more risky than debt, so you're not comparing like with like. The opportunity cost isn't 20-25% it is lost deposit savings income, or something similar and risk free. Probably 1 to 2% I'd say. Or perhaps 4 to 6% if you take out a bank loan to purchase the car?
2) suppose that £65k Alfa was available for £60k if bought outright, £65k on PCP - then you'd be better off buying. Even with a (say) 1.5% p.a. opportunity cost. Although I accept that the Alfa's used value after 4 years may be uncertain and that in itself might be reason to PCP.
Of course, if you crunch the numbers and the PCP deal comes out cheaper than buying outright, then fine. If you want to be geeky about it, you should calculate the Internal Rate of Return of each alternative, and pick the lowest.
The Alfa was available with £3250 off, given the spec I have. Half of which will be eaten up with the RFL. There is no way in hell a 4 year old, 60,000 mile Alfa will be worth £33k.
My 3yr 3mth old 640d (£74k list price, available at the time with £14500 discount) is currently worth £25-27k, even with the £5k Schnitzer performance kit and only 40,000 miles on the clock.
I reckon the Alfa will be close to, maybe under £20k at 4yrs/60,000miles. It will have lost over £40,000, c£840 per month. I'm paying c2/3rds of that?
Granfondo said:
TA14 said:
Brave Fart said:
2) suppose that £65k Alfa was available for £60k if bought outright, £65k on PCP - then you'd be better off buying. Even with a (say) 1.5% p.a. opportunity cost. Although I accept that the Alfa's used value after 4 years may be uncertain and that in itself might be reason to PCP.
Alfa values are not too dissimilar to other makes. A car that can be readily bought for £60K will be a £22K ish car after four years. Even if Ares was offered the car for £50K cash that's £28K depreciation plus £2K RFL = £30K vs £29K on PCP. It's an odd market place and Ares has simply found a very good deal via PCP.NickCQ said:
ashleyman said:
NickCQ said:
ashleyman said:
I actually did a Car-Wow for a facelift R today. Why would I pay cash?
You missed out the key piece of information - what's the interest rate on the PCP?DonkeyApple said:
Sorry Deamon but you've lost the plot and need to step back to the basics.
It's the whole macro economic situation of the entire consumer debt market and the global macro economic scenario of rising rates which has triggered the entire concern with regards to car related debt.
Keeping on trying to say that car debt has nothing to do with the specific situation that is causing the issue with car debt is madness.
And people might not default on their debt? Again what planet are you on? They already are and rates haven't even moved and you are trying to advocate that when debt does become more extremely endive that people won't be defaulting? And are you seriously trying to argue that people aren't selective in the default process.
Again you are wilfully ignoring facts in some insane head in the ground mania.
This isn't your world of 'samples of one' but just basic facts and science.
And you're re-writing of history in regards to the motor industry over 2009 is utter lunacy.
While we may agree that the individual consumer is not at risk from loss on their debt secured against vehicle usage in the U.K., this was established many, many pages ago and we have been discussing the various nuances of what is at risk should the manufacturers lose control over near term used values, should lenders reduce their book growth on the industry or should rates finally rise.
But your need to fragrantly try and re-write history and to repeatedly ignore facts and to make wild statements with no supporting evidence almost smacks of a guy trying to live with the guilt of conning hundreds of people into unsuitable debt deals so as to shift some cars and earn some dirty money?
Fine, i will leave you to your absolute view which clearly must be 100% correct as its your view and noone elses view is valid as a view as it must be madness or lunacy to not agree with your view. I dont know why you bother - other than i assume as some sort of ego boost over strangers on the internet - as you clearly arent remotely interested in other peoples opinions or experiences as part of any sort of reasoned debate.It's the whole macro economic situation of the entire consumer debt market and the global macro economic scenario of rising rates which has triggered the entire concern with regards to car related debt.
Keeping on trying to say that car debt has nothing to do with the specific situation that is causing the issue with car debt is madness.
And people might not default on their debt? Again what planet are you on? They already are and rates haven't even moved and you are trying to advocate that when debt does become more extremely endive that people won't be defaulting? And are you seriously trying to argue that people aren't selective in the default process.
Again you are wilfully ignoring facts in some insane head in the ground mania.
This isn't your world of 'samples of one' but just basic facts and science.
And you're re-writing of history in regards to the motor industry over 2009 is utter lunacy.
While we may agree that the individual consumer is not at risk from loss on their debt secured against vehicle usage in the U.K., this was established many, many pages ago and we have been discussing the various nuances of what is at risk should the manufacturers lose control over near term used values, should lenders reduce their book growth on the industry or should rates finally rise.
But your need to fragrantly try and re-write history and to repeatedly ignore facts and to make wild statements with no supporting evidence almost smacks of a guy trying to live with the guilt of conning hundreds of people into unsuitable debt deals so as to shift some cars and earn some dirty money?
Lets see what happens though. I'm happy to review it in a years time and we'll see who got closer to what happens in the motor industry.
DonkeyApple said:
But your need to fragrantly try and re-write history and to repeatedly ignore facts and to make wild statements with no supporting evidence almost smacks of a guy trying to live with the guilt of conning hundreds of people into unsuitable debt deals so as to shift some cars and earn some dirty money?
Yikes. A former proponent of binary options lecturing on morality.There's a joke in here somewhere.
A bookmaker and a car salesman are standing before St Peter at the pearly gates .............
Edited by anonymous-user on Tuesday 8th August 13:23
Edited by anonymous-user on Tuesday 8th August 13:35
NickCQ said:
Not so cheap. Unless the term was very short I'd probably take the cash option, although settling the PCP in cash shortly after purchase is clearly superior.
You've missed the point that cost of ownership over a fixed term as opposed to cost of outright purchase was the chap's motivation.djc206 said:
Ares said:
Unless early settlement has punitive penalties! Settlement figures in year one often have full term interest within.
You're entitled to withdraw from any financial product within the first 14 days without penalty are you not?Ares said:
Granfondo said:
TA14 said:
Brave Fart said:
2) suppose that £65k Alfa was available for £60k if bought outright, £65k on PCP - then you'd be better off buying. Even with a (say) 1.5% p.a. opportunity cost. Although I accept that the Alfa's used value after 4 years may be uncertain and that in itself might be reason to PCP.
Alfa values are not too dissimilar to other makes. A car that can be readily bought for £60K will be a £22K ish car after four years. Even if Ares was offered the car for £50K cash that's £28K depreciation plus £2K RFL = £30K vs £29K on PCP. It's an odd market place and Ares has simply found a very good deal via PCP.That's way cheaper than either a CP M3 or C63 both of which have far more support on them (discounts) than the QF presently has.
Gassing Station | General Gassing | Top of Page | What's New | My Stuff