Are the wheels about to fall of car finance?

Are the wheels about to fall of car finance?

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Discussion

daemon

35,724 posts

196 months

Thursday 23rd November 2017
quotequote all
RSK21 said:
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.
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...



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.
Its because hes....


limpsfield

5,871 posts

252 months

Thursday 23rd November 2017
quotequote all
RSK21 said:

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.
Agree with this.

"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"

That sounds like a cracking deal to me if you really wanted an M4. One year rental is half the cost of just the normal retail customer deposit

4941cc

25,867 posts

205 months

Thursday 23rd November 2017
quotequote all
RSK21 said:
Do I read that as the staff scheme was a preferential lease as opposed to the customer deal being a PCP ?
Correct. Effectively the company lends the employee the cash to buy the vehicle at a discounted price and the employee agrees to sell it back to them at an agreed value, the employee therefore ends up paying the interest due on the capital and the difference in capital value between the discounted new price and the buyback figure - or they can pay the buy back figure themselves plus an admin fee and keep the vehicle.

A great benefit to the staff member as it makes an otherwise unattainable vehicle very affordable, works for the employer as they get a registration to count towards targets and it feeds the used car market of 1 year old cars. When you look at many "ex-management" 6/12/18 month old vehicles from dealers of most manufacturers, that's what these vehicles are. Most schemes extend to spouse/partner at same address and you're allowed two, others extend to parents and siblings and you're allowed as many as qualify for the criteria.

Salespeople often take advantage of it as soon as they're eligible the monthly deduction works out less even than the BIK they'd pay running that same vehicle as a demonstrator (if they're even eligible to choose an M/AMG demonstrator etc.).

Slight digression, but another factor in how there are so many current/late plate vehicles in the parc at any point in time, when you think how many people nationally work in dealerships and for head offices of car manufacturers, it's not an insignificant contribution.

Prinny

1,669 posts

98 months

Thursday 23rd November 2017
quotequote all
My snip & bold...
4941cc said:
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...
Thanks for that, it makes it clearer for me. Much appreciated! beer
I now feel I better understand why advertising is moving toward a £x/month figure as the selling point, and why my negotiations on outright purchase aren’t met with enthusiasm - there’s nothing in it for the salesperson (relativley speaking). Interesting stuff.

4941cc

25,867 posts

205 months

Thursday 23rd November 2017
quotequote all
Prinny said:
I now feel I better understand why advertising is moving toward a £x/month figure as the selling point, and why my negotiations on outright purchase aren’t met with enthusiasm - there’s nothing in it for the salesperson (relativley speaking). Interesting stuff.
beer

New car net profits at MB were targeted around £200pu. Before Carwow came along. Since then it dropped to around -£600pu in terms of chassis profits with all front and back end margin accounted for. Only reason to do it was to add a few hundred £ of doc fee from the marketed finance plans (nothing made for the dealer on rate) and additional products like paint protection, SMART, alloy and tyre protect and GAP/RTI etc. that returned it to a net positive profit per unit on new cars - that and quarterly volume bonus IF the registration objective was met.

Very little interest in a "cash, no bits" buyer who's beating you up with a broker price as it is - until maybe the last day or two of either a new registration month or end of quarter and they're a few units short of a potential six or seven figure VB.

silentbrown

8,793 posts

115 months

Thursday 23rd November 2017
quotequote all
4941cc said:
New car net profits at MB were targeted around £200pu. Before Carwow came along. Since then it dropped to around -£600pu
Either I misunderstand, or you're missing a zero somewhere? £2000 to £600 would make sense. But blimey, is that all down to CarWow???

4941cc

25,867 posts

205 months

Thursday 23rd November 2017
quotequote all
silentbrown said:
4941cc said:
New car net profits at MB were targeted around £200pu. Before Carwow came along. Since then it dropped to around -£600pu
Either I misunderstand, or you're missing a zero somewhere? £2000 to £600 would make sense. But blimey, is that all down to CarWow???
No absent zeros. A downward swing of £800pu, starting from barely above zero, in just a few months and maintained since.

tannhauser

1,773 posts

214 months

Thursday 23rd November 2017
quotequote all
PeteinSQ said:
Chromegrill said:
It gets worse. A toaster and electric kettle that can be bought for £150 (which still seems a lot to me for basic kitchen gadgets!) are being advertised by Brighthouse for £227, except that the final payable is £6 per week for 52 weeks which comes to £312. Except it's not because on top of that you are required to pay insurance of £1.35 per week (£70.20 after a year) and advised to pay a maintenance fee of £1.20 per week or £62.40 too. So your £150 kettle and toaster, paid weekly over a year, comes to the grand total of £444.60, almost THREE TIMES the price you could buy it for paid all up front with a bit of online shopping. Even the maintenance contract and insurance together (about £133) comes to nearly the cheapest available purchase price.

Goodness I can't overstate how much I hate companies that exploit poor people (both the financially poor, and those who are poor at doing their sums and get fleeced). And if Brighthouse is going that for toasters, how many car retailers are doing the same thing for cars?
They are absolute scum. Preying on the desperate.
Preying on the fking retarded more like.

CS Garth

2,860 posts

104 months

Thursday 23rd November 2017
quotequote all
4941cc said:
beer


Very little interest in a "cash, no bits" buyer who's beating you up with a broker price as it is - until maybe the last day or two of either a new registration month or end of quarter and they're a few units short of a potential six or seven figure VB.
Can you advise when that is for MB, I'm a cash no bits buying with a broker price who will be buying shortly likely January but flexible

Thanks

tannhauser

1,773 posts

214 months

Thursday 23rd November 2017
quotequote all
r11co said:
@4941cc - You've confirmed what most of us have suspected!
Indeed. That the vast majority of the UK car buying public are reckless fools!

silentbrown

8,793 posts

115 months

Thursday 23rd November 2017
quotequote all
4941cc said:
No absent zeros. A downward swing of £800pu, starting from barely above zero, in just a few months and maintained since.
Wow. I missed the minus sign smile That's staggering. How do brokers make money, then?

Sheepshanks

32,535 posts

118 months

Thursday 23rd November 2017
quotequote all
4941cc said:
New car net profits at MB were targeted around £200pu. Before Carwow came along. Since then it dropped to around -£600pu in terms of chassis profits with all front and back end margin accounted for. Only reason to do it was to add a few hundred £ of doc fee from the marketed finance plans (nothing made for the dealer on rate) and additional products like paint protection, SMART, alloy and tyre protect and GAP/RTI etc. that returned it to a net positive profit per unit on new cars - that and quarterly volume bonus IF the registration objective was met.

Very little interest in a "cash, no bits" buyer who's beating you up with a broker price as it is - until maybe the last day or two of either a new registration month or end of quarter and they're a few units short of a potential six or seven figure VB.
In some way, you have to feel for dealers - the above is just insane.

Also makes it a pain for many buyers, of course. It's pushing people to do thing like take finance and other products that they don't want. They just want to buy a car.

Granfondo

12,241 posts

205 months

Thursday 23rd November 2017
quotequote all
tannhauser said:
r11co said:
@4941cc - You've confirmed what most of us have suspected!
Indeed. That the vast majority of the UK car buying public are reckless fools!
How do you work that out, it's not as if personal debt has increased over the last 10 years,I would imagine people have used the historic low interest rates to pay down their debt massively and are now sitting on large nest eggs waiting for interest rates to rocket!!! biggrin

4941cc

25,867 posts

205 months

Thursday 23rd November 2017
quotequote all
CS Garth said:
Can you advise when that is for MB, I'm a cash no bits buying with a broker price who will be buying shortly likely January but flexible

Thanks
Last week of March, September or last few days of March, June, September and particularly December - for most manufacturers who run their financial year in line with calendar year for reporting.

Provided you're happy to buy from physical stock that is ready to register straight away with funds ready to go.

The gamble of course is that if they've got their st sorted, they've already hit their reg month/quarterly/yearly target without needing to run it down to the wire, so won't need to necessarily entertain a suicide deal. Usually it will save them having to pre-reg a vehicle, which is always best avoided where possible.

4941cc

25,867 posts

205 months

Thursday 23rd November 2017
quotequote all
silentbrown said:
Wow. I missed the minus sign smile That's staggering. How do brokers make money, then?
See those document/admin fees they mention in their quotes? That is their profit on the transaction. Where those are absent, they are usually tied to a particular supplier and will receive an introductory commission per deal in the order of £50-300. Dealer pays that from the volume bonus money that comes because having a tied leasing broker on board means you hit your target - one hand washes the other.

Hence why when you Google Map search many of the registered company addresses of these lesser known independent brokerages, they are flats above chip shops, or a caravan parked at a farm etc.

NB: There is a difference between leasing brokers and leasing providers - the latter are the entities actually underwriting the deals and on the hook for the return and disposal of end of contract vehicles. Proper companies with the attendant financial resources etc. The ones who incur storage and reconditioning and remarketing costs and have to manage the commercial risks of missing RVs etc, as referenced earlier in discussions.

Edited by 4941cc on Thursday 23 November 13:54

anonymous-user

53 months

Thursday 23rd November 2017
quotequote all
4941cc said:
Correct. Effectively the company lends the employee the cash to buy the vehicle at a discounted price and the employee agrees to sell it back to them at an agreed value, the employee therefore ends up paying the interest due on the capital and the difference in capital value between the discounted new price and the buyback figure - or they can pay the buy back figure themselves plus an admin fee and keep the vehicle.

A great benefit to the staff member as it makes an otherwise unattainable vehicle very affordable, works for the employer as they get a registration to count towards targets and it feeds the used car market of 1 year old cars. When you look at many "ex-management" 6/12/18 month old vehicles from dealers of most manufacturers, that's what these vehicles are. Most schemes extend to spouse/partner at same address and you're allowed two, others extend to parents and siblings and you're allowed as many as qualify for the criteria.

Salespeople often take advantage of it as soon as they're eligible the monthly deduction works out less even than the BIK they'd pay running that same vehicle as a demonstrator (if they're even eligible to choose an M/AMG demonstrator etc.).

Slight digression, but another factor in how there are so many current/late plate vehicles in the parc at any point in time, when you think how many people nationally work in dealerships and for head offices of car manufacturers, it's not an insignificant contribution.
Agree aboaujyejy that it’s a major contributor towards the number of new cars on the roads.

You don’t live around the MK area by any chance do you ?

I have a relative who is ex Daimler UK, Audi UK and Porsche UK and you are right it is a great employee benefit. He went through all manner of SLs, 911s, Panameras, RS6 etc whilst his other half had GL, Q5, Cayenne and so on, plus his parents and my parents enjoying various more prosaic wheels at very advantageous rates.

I wouldn’t call any of them debt slaves smile


CS Garth

2,860 posts

104 months

Thursday 23rd November 2017
quotequote all
4941cc said:
A bunch of helpful stuff
Thanks appreciated

rattyuk2000

84 posts

168 months

Thursday 23rd November 2017
quotequote all
Having just been through the new car purchase thing myself, I took a PCP for the financial and service incentives and then cancelled in the 14 day cooling off period to pay in full. And the PCP price was based on a local dealer matching the CarWow quote.

I feel bad for the sales person.

But I have no sympathy for the dealer group, VW car company or VW financial services - because it's entirely their collective fault they have a market price discovery mechanism so opaque and complicated that it encourages savvy people to game it to get the best deal.


ReverseTriker

24 posts

82 months

Monday 18th December 2017
quotequote all


Apologies if mentioned, as a few days old , but I thought this was extremely relevant

"PCP time bomb: why your next car could cost you dear"

https://www.parkers.co.uk/car-finance/advice/pcp-t...

"An entry-level Audi A3 that would have set you back £190 per month just a year ago would cost you a whopping £298 now (on a 36-month contract with a £2,000 deposit and 10,000-mile-per-year allowance).

To keep the same monthly payments you’d have to put down a hefty £3,500-larger deposit. The question is, have you been putting enough money aside during the contract to be able to afford a £5,500 deposit now rather than the £2,000 needed previously?

Or can you afford to pay an extra £108 every single month simply to stick with a new version of the same car?..

...Mercedes C-Class: monthly payments up by £70 in eight months

soxboy

6,061 posts

218 months

Monday 18th December 2017
quotequote all
ReverseTriker said:
Apologies if mentioned, as a few days old , but I thought this was extremely relevant

"PCP time bomb: why your next car could cost you dear"

https://www.parkers.co.uk/car-finance/advice/pcp-t...

"An entry-level Audi A3 that would have set you back £190 per month just a year ago would cost you a whopping £298 now (on a 36-month contract with a £2,000 deposit and 10,000-mile-per-year allowance).

To keep the same monthly payments you’d have to put down a hefty £3,500-larger deposit. The question is, have you been putting enough money aside during the contract to be able to afford a £5,500 deposit now rather than the £2,000 needed previously?

Or can you afford to pay an extra £108 every single month simply to stick with a new version of the same car?..

...Mercedes C-Class: monthly payments up by £70 in eight months
It is only relevant if you are too stupid/ lazy to shop around. There is much better stuff that you can get for cheaper rates, how about an A4 or an A6 for less than the figures quoted above?

Edit to add A3 'entry level' for same price as it was before:
https://www.contracthireandleasing.com/independent...



Edited by soxboy on Monday 18th December 12:27