Are the wheels about to fall of car finance?
Discussion
Secrets of Your New Car
Dispatches investigates car finance, with undercover
filming
http://www.channel4.com/programmes/dispatches/on-d...
Santander replaces chief of US subprime auto lender unit
(google the title to find the FT story )
https://www.ft.com/content/9bf13770-8c05-11e7-a352...
Dispatches investigates car finance, with undercover
filming
http://www.channel4.com/programmes/dispatches/on-d...
Santander replaces chief of US subprime auto lender unit
(google the title to find the FT story )
https://www.ft.com/content/9bf13770-8c05-11e7-a352...
Edited by ReverseTriker on Wednesday 30th August 19:27
Edited by ReverseTriker on Wednesday 30th August 19:28
Edited by ReverseTriker on Wednesday 30th August 19:29
ReverseTriker said:
Secrets of Your New Car
Dispatches investigates car finance, with undercover
filming
http://www.channel4.com/programmes/dispatches/on-d...
Already discussed.Dispatches investigates car finance, with undercover
filming
http://www.channel4.com/programmes/dispatches/on-d...
Nothing new in it for anyone whos half a brain at all. And the woman who got her car badly repaired then seemed upset when she handed it back and their pulled her on it?
daemon said:
Because, as has been said, GFV is set at 80% of trade price, so even if all the cars are handed back to them they are still in profit.
Theres little risk to the finance company and little risk to the purchaser (?) as they can hand the car back and move on to the next, best deal from a manufacturer / finance company / leasing company wanting to gain market share.
Theres little risk to the finance company and little risk to the purchaser (?) as they can hand the car back and move on to the next, best deal from a manufacturer / finance company / leasing company wanting to gain market share.
The FCA review is due out today on consumer debt.
When it was first opened it was going to specifically target products and how they were sold. So misleading terms like 'zero finance' were to be banned, deceptive products like 'nothing to pay for 6 months' were to be tightened to remove their intent to farm defaulters and there were to be enormous changes to who could sell debt to bring the consumer market online with the financial markets.
But post Brexit the pressure on the regulator has been to do nothing to jeopardise UK jobs and it is generally believed now that nothing will be done to risk the growth of consumer debt consumption as the entire British economy rests on people spending more than they earn. So it is thought that all today's Report will do is focus on the banks and just to instruct them to lodge more capital reserves to cover consumer debt defaults plus a few words on sharp practices.
What this means for car debt? Nothing really. It looks like they've realised that much of this debt is written by the banking arms of the manufacturers and as almost all manufacturers are outside of the UK then their default is not our consumer concern. Switching diesel users to hybrid over the next decade is going to require consumers to continue increasing debt spending and it looks like they want nothing to slow this area of tax revenues.
In short, it looks like we will get a series of platitudes and sound bites with almost nothing changing.
When it was first opened it was going to specifically target products and how they were sold. So misleading terms like 'zero finance' were to be banned, deceptive products like 'nothing to pay for 6 months' were to be tightened to remove their intent to farm defaulters and there were to be enormous changes to who could sell debt to bring the consumer market online with the financial markets.
But post Brexit the pressure on the regulator has been to do nothing to jeopardise UK jobs and it is generally believed now that nothing will be done to risk the growth of consumer debt consumption as the entire British economy rests on people spending more than they earn. So it is thought that all today's Report will do is focus on the banks and just to instruct them to lodge more capital reserves to cover consumer debt defaults plus a few words on sharp practices.
What this means for car debt? Nothing really. It looks like they've realised that much of this debt is written by the banking arms of the manufacturers and as almost all manufacturers are outside of the UK then their default is not our consumer concern. Switching diesel users to hybrid over the next decade is going to require consumers to continue increasing debt spending and it looks like they want nothing to slow this area of tax revenues.
In short, it looks like we will get a series of platitudes and sound bites with almost nothing changing.
DonkeyApple said:
What this means for car debt? Nothing really. It looks like they've realised that much of this debt is written by the banking arms of the manufacturers and as almost all manufacturers are outside of the UK then their default is not our consumer concern.
So basically what a lot of us were saying anyway - the risk is neither on the consumer OR on financial institutions in the UK anyway.Edited by daemon on Monday 25th September 12:50
DonkeyApple said:
Switching diesel users to hybrid over the next decade is going to require consumers to continue increasing debt spending and it looks like they want nothing to slow this area of tax revenues.
That actually raises a very good point - and i guess can be likened to the TV market. TV manufacturers got pretty much everyone to convert to flat screen TVs, THEN once they'd got that ball rolling, we had LED, HD, 4K etc to "convert" customers over to.I guess theres a massive market now to "convert" people away from diesels (and to a lesser extent petrols) in to hybrids, and once they've done that cycle it'll be time to move everyone to electric vehicles. Theres 30 years of business mapped out!
daemon said:
So basically what a lot of us were saying anyway?
It depends on what was being said. A strong argument was that the level of debt was of no risk but this obviously isn't true. What some were saying was that the first layer of risk on car debt lay more with financial entities located outside of the U.K. Obviously a very large chunk of the secondary risk comes back to London banks!Ultimately, it looks like the problem is being kicked down the road due to Brexit concerns. It's not passing a clean bill of health on the vending of consumer debt but recognising that to take the required actions now will jeopardise the tax take and growth of what is a near debt fuelled consumer economy at a time when it is not appropriate to do so.
daemon said:
DonkeyApple said:
Switching diesel users to hybrid over the next decade is going to require consumers to continue increasing debt spending and it looks like they want nothing to slow this area of tax revenues.
That actually raises a very good point - and i guess can be likened to the TV market. TV manufacturers got pretty much everyone to convert to flat screen TVs, THEN once they'd got that ball rolling, we had LED, HD, 4K etc to "convert" customers over to.I guess theres a massive market now to "convert" people away from diesels (and to a lesser extent petrols) in to hybrids, and once they've done that cycle it'll be time to move everyone to electric vehicles. Theres 30 years of business mapped out!
DonkeyApple said:
daemon said:
So basically what a lot of us were saying anyway?
It depends on what was being said. A strong argument was that the level of debt was of no risk but this obviously isn't true. What some were saying was that the first layer of risk on car debt lay more with financial entities located outside of the U.K. Obviously a very large chunk of the secondary risk comes back to London banks!Ultimately, it looks like the problem is being kicked down the road due to Brexit concerns. It's not passing a clean bill of health on the vending of consumer debt but recognising that to take the required actions now will jeopardise the tax take and growth of what is a near debt fuelled consumer economy at a time when it is not appropriate to do so.
Yipper said:
Car debt is ~90% smaller than mortgage debt, so there is really no major risk from car finance in the UK or US. It is a relatively small industry. Nobody is buying a 500k car with a 50k salary (like they were at the peak of the housing bubble a few years ago).
Car debt forms part of the consumer debt bubble which is deemed a greater risk than the housing debt pile which has been being deleveraged and tempered for the last few years along with the lenders being forced to hold greater reserves. Consumer debt has spiralled as it has become a more lucrative means to milk punters and car debt is a massive part of this. The only difference is that the car debt side is held mostly by entities which fall outside of the U.K. initially although clearly their counterparts risk does like in London. The size of the debt isn't even relevant if the larger debt is properly margined and hedged and the smaller one is not.
Venturist said:
My main question with it is what is happening to all the off-lease cars. The financial model is built around the manufacturer being able to get a particular value for the car when it comes back and enters the second hand market. But even if they are stockpiling them to artificially preserve second hand values, that just means they've got a huge pile of assets that they can say is worth £X billion but in actuality if they had to liquidate the market would be flooded and values would drop through the floor.
What is the advantage to them of keeping the stockpiled cars? The payments from the lease period surely hasn't covered the cost of manufacturing the car let alone turned a profit, and the longer they stockpile the car before releasing it onto the used market, the less it's worth... and if they keep the values high then most people would prefer to jump up to a new car instead of making a slight saving on buying second hand.
I speak as someone who embraces the PCP method because it works for me and I don't mind that I'm indirectly paying for the privilege, but there is a big hole in the system on the manufacturer's end that I don't understand.
My understanding is the cars that are returned off lease get sent to auctionWhat is the advantage to them of keeping the stockpiled cars? The payments from the lease period surely hasn't covered the cost of manufacturing the car let alone turned a profit, and the longer they stockpile the car before releasing it onto the used market, the less it's worth... and if they keep the values high then most people would prefer to jump up to a new car instead of making a slight saving on buying second hand.
I speak as someone who embraces the PCP method because it works for me and I don't mind that I'm indirectly paying for the privilege, but there is a big hole in the system on the manufacturer's end that I don't understand.
Edited by Venturist on Sunday 26th March 10:21
It will be interesting to see whether the greater shift to EV/hybrid naturally inhibits finance growth - traditionally their lower residual values have corresponded to monthlies that are higher. Chuck in more expensive money in the form of interest rates and the headwind is there.
That said I would never under estimate the financial alchemy which will keep things rolling.....
That said I would never under estimate the financial alchemy which will keep things rolling.....
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