Are the wheels about to fall of car finance?
Discussion
A bit of real world:
Me:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
So overall in my experience i'd say this practice is widespread as people dont simply want to understand what they are doing.
Me:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
So overall in my experience i'd say this practice is widespread as people dont simply want to understand what they are doing.
HumanDoing said:
I'm glad that provides such mirth. I didn't say it wasn't worth getting bothered about, I said it's not worth running around shouting about £20 a month. Funny how the same people who claim that the difference between 2% and 3% interest is nothing are now getting all teary-eyed about £20 a month.
Where are these people ?HumanDoing said:
The average person these days will earn about £1.25 million over their working life so said friend is crowing about saving 0.00056% of career earnings.
Actually he isn't crowiing, we disagree (amicably) on the financial wisdom of changing your car every three years (I have only had three this century 
) and he is merely putting the case that you aren't tied to the same company, but can switch around cost-effectively. Perhaps this is another analogy with mobile phones?HumanDoing said:
nickfrog said:
Once again, some PCP deals are great, some are terrible (and there is a wide spectrum between the two).
Some people are dim, some are not (and there is a wide spectrum between the two).
Only the binary thinkers who can't accept the above and make sweeping statements are totally thick or simply trolling or both.
Nickfrog, it is possible for someone to disagree you without being 'totally thick' or 'simply trolling'.Some people are dim, some are not (and there is a wide spectrum between the two).
Only the binary thinkers who can't accept the above and make sweeping statements are totally thick or simply trolling or both.
HumanDoing said:
It is also perfectly reasonable for someone to point out that MOST PCP deals are massively slanted in favour of the dealer rather than the customer, and finding a small number that beat depreciation curves on a new car doesn't actually disprove the point of those who suggest that PCP is USUALLY a bad way to go compared to buying outright, or used at 2 or 3 years.
Where's your rationale, evidence, source or data ? And what does it matter if indeed a minority of deals beat depreciation ? Would you just ignore them ?
HumanDoing said:
Can we move on from this trenches at dawn scenario where any disagreement is a source of immediate ridicule and abuse being hurled across the battlefield?
What ridicule ? What abuse ? Granfondo said:
I remember a time not long ago when I said things like "perpetual car prison" sounds a bit like your "debt trap" and you were very vociferous in your condemnation!
The tide is turning!
I don't disagree with car finance, but I do disagree with people being stitched up. The tide is turning!
I think car finance is fine, even if you pay it till the end of your days, but it has to be a fair deal.
Mandat said:
It's an interesting example but all you've done is compare a PCP deal with a HP deal, with a hugely differing APR between the two.
Any prudent and mildly intelligent car buyer would likewise look at the differing finance options, compare APR's, total cost, etc.
I don't think that mis-selling a al "PPI" is an appropraite comparison, as the dealers are only offering a poor bargain (compared to what else might be avaialble on the market) rather than mis-selling a product that the purchaser cannot use at all, as was the case with PPI.
How many people who walk into dealerships to buy a nearly new car do you think are pushed away from the 10,9%, 11.9% and 12.9% PCP deals and are told "Well actually sir, you could do a straight repayment over the same period at a considerably lower rate and the interest saved would mean you have no balloon to pay at the end." Any prudent and mildly intelligent car buyer would likewise look at the differing finance options, compare APR's, total cost, etc.
I don't think that mis-selling a al "PPI" is an appropraite comparison, as the dealers are only offering a poor bargain (compared to what else might be avaialble on the market) rather than mis-selling a product that the purchaser cannot use at all, as was the case with PPI.
If the sales guys don't understand it what hope have many customers, I bet 50% of customers (probably more like 90%) don't even realise you can get a far better deal if you don't go PCP, or even realise PCP is not the only option.
And that is the point I am making.
Sales people are there to sell the companies products. As long as there are no scams, lies, mis-selling, etc then maximising profits is not necessarily wrong or unethical.
Buyers also have a duty to themselves to do their own due dilligence when buying anything. Those that don't will invariably end up with a poor bargain, and that won't necessarily be the sales person's fault. .
Buyers also have a duty to themselves to do their own due dilligence when buying anything. Those that don't will invariably end up with a poor bargain, and that won't necessarily be the sales person's fault. .
axel1990chp said:
I think some of the financing troubles come from a lack of understanding and in part a dangerous lack of a minimum age limit.
There are young kids in the exact same position I was in at my work, they've done their apprenticeship and they don't know what to do with the money. Have one of them looking at RS5's and CLA45's on used PCP deals and the other at BMW M used PCP prices. No matter what I say to them there is no talking them out of it either, they don't seem to care for the hindsight figures or the possibility of being with nothing by the end of it.
This is why I think car finance should have a limit - car by age, perhaps not a 25+ for any finance, but e.g if you want to finance a car for £10,000 you need to be 20? Want 20,000 - 25yo etc etc.
Perhaps its not fair to some people, there are plenty of young kids with their head screwed on making eccentric amounts of money - but with that comes the buy it with cash option.
There are young kids in the exact same position I was in at my work, they've done their apprenticeship and they don't know what to do with the money. Have one of them looking at RS5's and CLA45's on used PCP deals and the other at BMW M used PCP prices. No matter what I say to them there is no talking them out of it either, they don't seem to care for the hindsight figures or the possibility of being with nothing by the end of it.
This is why I think car finance should have a limit - car by age, perhaps not a 25+ for any finance, but e.g if you want to finance a car for £10,000 you need to be 20? Want 20,000 - 25yo etc etc.
Perhaps its not fair to some people, there are plenty of young kids with their head screwed on making eccentric amounts of money - but with that comes the buy it with cash option.
Don't quite follow this, apprentices or those that have just qualified are generally on very low wages (or am I wrong ?) so how can they afford RS5 and BMW M cars assuming pcp payments are probably £600-700 a month ?
HumanDoing said:
Ahbefive said:
It really is an odd thing to keep repeating. I can only imagine how odd is sounds during actual conversation if he says it then too.
I really don't get the fascination, maybe it's from hanging around with 2 year olds for several years? It is plain weird.
I've never 'hung around with 2 year olds for several years', nor suggested in any way that I have. Please keep posts on topic rather than posting nonsense pulled from heaven knows where. I really don't get the fascination, maybe it's from hanging around with 2 year olds for several years? It is plain weird.
I mean what does "soiled nappies" have to do with the topic either???
Is is so weird, I can't see how you can't see it.
GTIAlex said:
A bit of real world:
Me:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
And the opportunity to be smug on the internet to a bunch of random strangers.......pricelessMe:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
gizlaroc said:
Granfondo said:
I remember a time not long ago when I said things like "perpetual car prison" sounds a bit like your "debt trap" and you were very vociferous in your condemnation!
The tide is turning!
I don't disagree with car finance, but I do disagree with people being stitched up. The tide is turning!
I think car finance is fine, even if you pay it till the end of your days, but it has to be a fair deal.
berlintaxi said:
GTIAlex said:
A bit of real world:
Me:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
And the opportunity to be smug on the internet to a bunch of random strangers.......pricelessMe:
I PCP a Fiesta ST-3, new, over 2 years, no deposit. 214pm, 10k.
18 months in, loving the car, can easily easily easily afford the monthly and will run to the end of the term where Ford will get the car back and I will walk away to try something else.
Friend of mine:
Diesel focus St-2 was paying over £300pm
Changed after 9 months (new privilege voucher through Ford) to "save money on insurance"
While doing so, transferred some negative equity (obviously) into a Ford 1.0 140 Ecoboost for £240pm (more than my ST pm)
8 months into that decided needs a bigger car (family hasnt changed size)
Orders a Kuga St Line to be picked up early 2018
Transfers more negative equity into that "deal" meaning he is now paying just over £350pm and is happy as anything.
I work with a number of people involved in the Ford Privilege scheme as we get on the scheme through our work.
Cue 80% of the people who end up with a Ford, blindly walking into dealers, thinking they are getting deals and transfering negative equity into each car every 9 months because "can swap it for a new one every 9 months"
I do my best to try and explain but have given up and let them get on with it.
Somewhat ironically, one factor that has led to the consumer mindset of changing mid-term, is that through the course of making changes to lender practices in order to "Treat Customers Fairly" (capitalisation deliberate), punitive penalties for settling an agreement early were removed, a limit set at one month's interest on the outstanding capital balance, rather than an admin fee of several hundred pounds, plus around 50% of the term interest that would have been due.
As such, with interest rates as relatively low as they are, a month's pro rata interest and no fee (which usually gets absorbed by the dealer in the next deal, as a bit of goodwill) have no disincentivising effect for people to take on a greater financial commitment.
The amounts of negative equity that have been rolled over each time as a poster above alluded are in excess of what even the formerly punitive charges would have been. £5-8k not uncommon for certain German brands that I've worked for in recent years, £10-15k in a few cases on lumpy stuff like SLs, S Class, 6/7 Series etc. Most I've seen is £38k of NE after 8 months - successfully rolled into a new agreement, paid for by manufacturer support + deposit contribution + dealer margin. So long as the invoice total is no more than list price, it can get funded...
As such, with interest rates as relatively low as they are, a month's pro rata interest and no fee (which usually gets absorbed by the dealer in the next deal, as a bit of goodwill) have no disincentivising effect for people to take on a greater financial commitment.
The amounts of negative equity that have been rolled over each time as a poster above alluded are in excess of what even the formerly punitive charges would have been. £5-8k not uncommon for certain German brands that I've worked for in recent years, £10-15k in a few cases on lumpy stuff like SLs, S Class, 6/7 Series etc. Most I've seen is £38k of NE after 8 months - successfully rolled into a new agreement, paid for by manufacturer support + deposit contribution + dealer margin. So long as the invoice total is no more than list price, it can get funded...
jonny70 said:
Don't quite follow this, apprentices or those that have just qualified are generally on very low wages (or am I wrong ?) so how can they afford RS5 and BMW M cars assuming pcp payments are probably £600-700 a month ?
Because most likely they still live with their parents and cadge cash off them every now and then.NickCQ said:
jonny70 said:
Don't quite follow this, apprentices or those that have just qualified are generally on very low wages (or am I wrong ?) so how can they afford RS5 and BMW M cars assuming pcp payments are probably £600-700 a month ?
Because most likely they still live with their parents and cadge cash off them every now and then.4941cc said:
NickCQ said:
jonny70 said:
Don't quite follow this, apprentices or those that have just qualified are generally on very low wages (or am I wrong ?) so how can they afford RS5 and BMW M cars assuming pcp payments are probably £600-700 a month ?
Because most likely they still live with their parents and cadge cash off them every now and then.
4941cc said:
Yep, certainly the case for dealer techs I've worked with for years. Retail deal on an M4 DCT coupe was around £10k deposit for £679 per month. Staff scheme for the same car was £409 per month (deducted from pay, so no credit application necessary either) with no deposit for 12 months and 12,000 miles (add £10pm for £3k of Competition Pack), so that helps too...
Do I read that as the staff scheme was a preferential lease as opposed to the customer deal being a PCP ?Edited by anonymous-user on Thursday 23 November 11:58
Granfondo said:
4941cc said:
NickCQ said:
jonny70 said:
Don't quite follow this, apprentices or those that have just qualified are generally on very low wages (or am I wrong ?) so how can they afford RS5 and BMW M cars assuming pcp payments are probably £600-700 a month ?
Because most likely they still live with their parents and cadge cash off them every now and then.The providers of products and services providing their employees with access to those same products and services at a substantially discounted rate vs what the public can achieve has been common practice for years. The automotive industry in particular is well know for it and it is often pitched as a core benefit to prospective employees.
I honestly can’t see what is smoke and mirrors about the example given.
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