Are the wheels about to fall of car finance?

[daemon]

soxboy said:

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

More selective, lazy journalism for a "sensationalist" story.

[DJT]

There was an article on Radio 4 Money Box recently. No evidence presented of any ticking time bomb, but did mention that PCP deals in future will be more expensive on a like for like basis. Two reasons: cost of new cars going higher due to weakness in Sterling and lower second hand prices due to PCP cars from previous PCPs flooding market and depressing prices.

[liner33]

DJT said:

There was an article on Radio 4 Money Box recently. No evidence presented of any ticking time bomb, but did mention that PCP deals in future will be more expensive on a like for like basis. Two reasons: cost of new cars going higher due to weakness in Sterling and lower second hand prices due to PCP cars from previous PCPs flooding market and depressing prices.

Yeah and increased apr on deals with reduced dealer contributions (Unless they are trying to shift models/keep the factory busy)

I've always said the market will adjust and become less attractive and thats what will reduce the take up of finance deals on new cars

[daemon]

liner33 said:

DJT said:

There was an article on Radio 4 Money Box recently. No evidence presented of any ticking time bomb, but did mention that PCP deals in future will be more expensive on a like for like basis. Two reasons: cost of new cars going higher due to weakness in Sterling and lower second hand prices due to PCP cars from previous PCPs flooding market and depressing prices.

Yeah and increased apr on deals with reduced dealer contributions (Unless they are trying to shift models/keep the factory busy)

I've always said the market will adjust and become less attractive and thats what will reduce the take up of finance deals on new cars

Yes, thats it in a nutshell.

Plus the new car market has went off a bit anyway as people are afraid of both future diesel taxation changes and the impact of brexit, so the pressure is leaving the market anyway.

[nyxster]

Well it's not really a time bomb is it?

If people can no longer afford the new car deals, then they'll be forced back into the used car market to buy cars on traditional hp at a figure they can afford. That will then soak up the excess supply of used inventory and cut new car supply which will balance things out. As new car sales drop the manufacturers will be forced to cut prices and offer deals making them cheaper in order to shift excess inventory and the whole merry-go-round will start anew.

I don't see why it's a 'time bomb' - if people can't afford something they generally seek out a cheaper alternative.

[silentbrown]

soxboy said:

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...

You're comparing PCP with PCH. there have always been cheaper lease deals, but leasing isn't suitable for everyone.

[omariqy]

Wish I read this before I went in for my deal for the X1. Then again I feel that I got a good deal and I did all the maths. Be good to hear whether I did a good deal or not from someone in the know.

The car was in stock and they were doing PCP deal for 1.9% much less than I can get at any bank given the amounts involved. Car was valued at £37.5k and I got down to £32k as it was 2 days before the 1.9% deal ended. I've put down £5k and pay c£310 per month over 4 years for 10k miles. I am putting away £50 a month towards the next deposit and I intend to run it close to the end of the 4 year term and use different dealers against each other to try and get the best deal. Maybe pick the X1 and 2 other cars that I like to get them to fight it out. Or am I being naive?

[Uggers]

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

[daemon]

Uggers said:

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

I think so, yes. We might see incremental increases, or it might remain relatively flat.

[Hungrymc]

daemon said:

Uggers said:

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

I think so, yes. We might see incremental increases, or it might remain relatively flat.

Its also possible that the OEMs have to fight harder to maintain sales in a shrinking market - you might see even more incentives such as cheap finance.

[daemon]

Hungrymc said:

daemon said:

Uggers said:

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

I think so, yes. We might see incremental increases, or it might remain relatively flat.

Its also possible that the OEMs have to fight harder to maintain sales in a shrinking market - you might see even more incentives such as cheap finance.

Yes, i think there could be deals to be had - both in extra discount and as you say with incentivised finance offers.

[captain_cynic]

Uggers said:

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

What is happening is that people are choosing to keep their current cars for longer or buying used cars as the prospect of buying or leasing a new car is not attractive. This is due to a fall in disposable and discretionary income (disposable = money you have left after taxes, discretionary = money you have left after bills and essentials). When discretionary income falls, expensive luxuries are usually cut first.

Those watching the used car market have seen it become less competitive for the same reason. More demand and less supply of used cars.

So we're going to see a contraction of the car finance market as we would expect to see when economies take a downturn. However it won't be the carpocolypse some are expecting (hoping for).

[daemon]

captain_cynic said:

Uggers said:

http://www.bbc.co.uk/news/business-42571828

Is this the point where the market has reached its peak and we will see a small but steady climb in finance for cars? Despite the fall in sales, in historical terms it has still been a decent year.

What is happening is that people are choosing to keep their current cars for longer or buying used cars as the prospect of buying or leasing a new car is not attractive. This is due to a fall in disposable and discretionary income (disposable = money you have left after taxes, discretionary = money you have left after bills and essentials). When discretionary income falls, expensive luxuries are usually cut first.

Those watching the used car market have seen it become less competitive for the same reason. More demand and less supply of used cars.

So we're going to see a contraction of the car finance market as we would expect to see when economies take a downturn. However it won't be the carpocolypse some are expecting (hoping for).

Really?

What CAP, Glass's Guide, market analysts and the big players are reporting the contributing reasons as :-

=> The lack of clear policy over future taxation around "clean air"
=> The market is cyclical, so you cant keep having increases year on year
=> People "converting" to PCP / PCH deals away from used purchases has reached saturation point
=> Rates on these deals have gone up, so they are less palatable than they were
=> Fear over Brexit

http://www.bbc.co.uk/news/business-41773715

[treeroy]

I don't know how true it is that finance deals are getting more expensive, but it'd hardly be surprising. They are based on depreciation, and the more new cars are sold, the fewer used cars are sold, the more depreciation there will be. That seems like common sense to me.

[gizlaroc]

treeroy said:

I don't know how true it is that finance deals are getting more expensive, but it'd hardly be surprising. They are based on depreciation, and the more new cars are sold, the fewer used cars are sold, the more depreciation there will be. That seems like common sense to me.

Bingo!

It is a vicious circle.

Plus cheap lease deals mean used cars have to be even cheaper, other wise you just buy/lease new, this is now happening, but because the used values are dropping we are now seeing PCP/Lease deals get more expensive.
Plus we seem to have had a pretty big jump in prices for the first time in a very long time on new cars, which is also effecting the PCP deals.

I do also think that a 5 year old car, like my Merc E Class, with 105k miles on it still feels so solid and new that there is little reason to change, buy the time some of my cars from 10 years ago were that age they were starting to feel a little tired and dated.

[nickfrog]

daemon said:

soxboy said:

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...

More selective, lazy journalism for a "sensationalist" story.

Exactly, the journo has ZERO knowledge of the subject matter. Overall lease rates have gone up a little, but by a small fraction of the drop in £ value.

And manufacturers still pump MASSIVE support on some lease deals. Typical recent examples are A4s 1.4 which have been around the £5,500 mark (24m/20k miles) for a S-Line and new Skoda Karoq 1.5 at around the £5k mark. Both lease deals will yield less than the equivalent of 1% depreciation per month vs RRP, probably closer than 0.8% for the A4. Which should still be significantly less than actual depreciation over the term.

I can actually see that kind of support increasing as sales carry on being sluggish.

[andrew]

gizlaroc said:

I do also think that a 5 year old car, like my Merc E Class, with 105k miles on it still feels so solid and new that there is little reason to change, buy the time some of my cars from 10 years ago were that age they were starting to feel a little tired and dated.

this is one of the reasons that these finance schemes were promoted : to keep people on the three-year cycle

[nickfrog]

treeroy said:

I don't know how true it is that finance deals are getting more expensive, but it'd hardly be surprising. They are based on depreciation, and the more new cars are sold, the fewer used cars are sold, the more depreciation there will be. That seems like common sense to me.

It could have an impact indeed but remember that the cars coming out of PCP/lease can be yield managed and/or stay in the networks, which helps to control values.

[gizlaroc]

nickfrog said:

It could have an impact indeed but remember that the cars coming out of PCP/lease can be yield managed and/or stay in the networks, which helps to control values.

They can, and often do, the problem is, we are at the point where main dealers are having a very hard time trying to sell their used stock (which is meant to be the money maker) because even at 2 years old it is costing more than someone can be in a new car for.

It is case of going cheaper and cheaper year on year (in real terms) to buy market share, problem is do you want the market share of something not making any real money?

[Ares]

No signs here.

Friend just picked up a brand new, £86k FF Range Rover for £66k. He's pushed it through a PCP and is paying £525/mth (+VAT).