Are the wheels about to fall of car finance?

[Deep Thought]

piston25m said:

Brooking10 said:

Agreed

But that doesn’t equate to the fact that the word deposit guarantees a return of the same value !

Perhaps what concerns me the most is how many people are pushed into, or even take PCP finance by choice, without understanding the basics of how it works.

I remember talking to someone who didn't understand that they were paying interest on "amount borrowed" + "optional final payment". They thought that they were only paying interest on the amount borrowed, which was something like £10,000 on a £24,000 car.

"Deposit" is a widely used term though. For example you dont get your deposit back on a house when you take out and pay off the mortgage.

Likewise yes, some people really do need to read what they are signing up to and understand it. Even moreso now that the likes of BMW are charging a horrendously high 12.4% APR on used cars which can add up to ££,£££ of interest.

[Baron von Teuchter]

Deep Thought said:

piston25m said:

Brooking10 said:

Agreed

But that doesn’t equate to the fact that the word deposit guarantees a return of the same value !

Perhaps what concerns me the most is how many people are pushed into, or even take PCP finance by choice, without understanding the basics of how it works.

I remember talking to someone who didn't understand that they were paying interest on "amount borrowed" + "optional final payment". They thought that they were only paying interest on the amount borrowed, which was something like £10,000 on a £24,000 car.

"Deposit" is a widely used term though. For example you dont get your deposit back on a house when you take out and pay off the mortgage.

Likewise yes, some people really do need to read what they are signing up to and understand it. Even moreso now that the likes of BMW are charging an ass rapingly high 12.4% APR on used cars

12.4%?!

You can borrow £25k from Sainsbury's for 2.9%

[Edible Roadkill]

Bmw is a bit of a strange one on their interest rates, as they offer their own BMW funded finance and always seemingly do 0% on a new car. 6 month old car on the other hand is 12% - eh aye very good. I really don't get how they sell used cars on their rates. Surely nobody finds 12% acceptable!?

[captain_cynic]

Edible Roadkill said:

Bmw is a bit of a strange one on their interest rates, as they offer their own BMW funded finance and always seemingly do 0% on a new car. 6 month old car on the other hand is 12% - eh aye very good. I really don't get how they sell used cars on their rates. Surely nobody finds 12% acceptable!?

BMW clearly don't want to finance their old cars, the 12% is saying "get finance from somewhere else if you need it".

[Deep Thought]

Edible Roadkill said:

Bmw is a bit of a strange one on their interest rates, as they offer their own BMW funded finance and always seemingly do 0% on a new car. 6 month old car on the other hand is 12% - eh aye very good. I really don't get how they sell used cars on their rates. Surely nobody finds 12% acceptable!?

If i was ever taking out a PCP agreement again it would have to be at less than 2% or ideally 0% APR.

Even their non-incentivised new car rate is now 5.9%.

Frankly they're having a laugh now.

Edited by Deep Thought on Thursday 18th October 13:59

[ITP]

Below is a definition of the word deposit.

Cars would be number 2 and 2.1.

The debatable point being that it can be the first instalment on the PURCHASE of something, with crucially, the ‘balance payable later’. But, as we all know, people very rarely purchase the item (the balloon), but hand it back. Your name is never down as the owner. This is where a house ‘deposit’, differs from a car pcp purchase.

Therefore, in the case of car finance, you are renting it therefore item 2.1 should maybe apply?
Meaning the word ‘deposit’ is somewhat of a stretch of the truth.

And yes, I do relate the word deposit to 70’s lemonade bottles too!


Dictionary definition

1. A sum of money paid into a bank or building society account.
‘cash funds which are an alternative to bank or building society deposits’

More example sentences
2. A sum payable as a first instalment on the purchase of something or as a pledge for a contract, the balance being payable later.
‘we've saved enough for a deposit on a house’

More example sentencesSynonyms
2.1 A returnable sum payable on the hire or rental of something, to cover possible loss or damage.
‘a refundable €100 deposit is payable on arrival at the villa’

[Edible Roadkill]

Baron von Teuchter said:

I walked past a Volvo dealer the other day. Outdoor forecourt full of new cars all with £399/month, £499/month etc plastered all over them. Nowhere (obvious) did it come close to suggesting what the full price was. What's an XC90 these days? £50k?

I suspect a lot of people would blanch at the idea of a £50k car. £499 a month? No problem.

It's an awesome marketing ploy.

This is the exact car I would like to get into next, done some homework regarding how I'd get one:

PCP deal stacks up as 9k deposit, 48X440 and a 24k balloon.

If I lease the same car is 9+47 x £379

After 4yrs I'll be 8.5k better off, 10.5k if we factor road tax in!!, I'll be no closer to actually owning the vehical than the alternative and actually someone else is taking the risk of holding a naughty diesel car as realistically we don't know what 4yrs down the line looks like for diesel cars .

Why the heck do people still PCP ???

Edited by Edible Roadkill on Thursday 18th October 14:08

[Edible Roadkill]

captain_cynic said:

Edible Roadkill said:

Bmw is a bit of a strange one on their interest rates, as they offer their own BMW funded finance and always seemingly do 0% on a new car. 6 month old car on the other hand is 12% - eh aye very good. I really don't get how they sell used cars on their rates. Surely nobody finds 12% acceptable!?

BMW clearly don't want to finance their old cars, the 12% is saying "get finance from somewhere else if you need it".

But they have their own finance arm of the company now they are in their own rights a bank. So why wouldn't they want to monopolise on used credit as well as new??

If they were reasonably competitive I'd maybe think about using them but at 12.4% I'd frankly prefer to nail my nob to their burning showroom and drive away in my old but paid for car.

Edited by Edible Roadkill on Thursday 18th October 14:03

[Ares]

Deep Thought said:

"Deposit" is a widely used term though. For example you dont get your deposit back on a house when you take out and pay off the mortgage.
.

Actually.....you do.

[Ares]

Deep Thought said:

If i was ever taking out a PCP agreement again it would have to be at less than 2% or ideally 0% APR.

Even their non-incentivised new car rate is now 5.9%.

Frankly they're having a laugh now.

Edited by Deep Thought on Thursday 18th October 13:59

But the 0% offers are usually smoke and mirrors.

45% deposit, 50% Balloon payment at the end of term. 5% spread over 24 months 'at 0%'.

[Edible Roadkill]

piston25m said:

Edible Roadkill said:

But they have their own finance arm of the company now they are in their own rights a bank. So why wouldn't they want to monopolise on used credit as well as new??

I suspect so people come into the dealership looking at used cars and leave with a new car. I could have a used one for £300 a month and £3000 down, or a new one for the same amount.

Trouble is we have a huge used car market flooded with ex-PCP cars and no one to sell them to. What will happen with that I don't know.

Clearly this is what happens as I see evidence to support this all the time I'm just at a loss as to how it's tangable business plan. The used cars must need to be resold and filtered out somewhere.

[Deep Thought]

Ares said:

Deep Thought said:

"Deposit" is a widely used term though. For example you dont get your deposit back on a house when you take out and pay off the mortgage.
.

Actually.....you do.

Only when you sell, not when you complete the agreement, and its not guaranteed.

[Deep Thought]

Ares said:

Deep Thought said:

If i was ever taking out a PCP agreement again it would have to be at less than 2% or ideally 0% APR.

Even their non-incentivised new car rate is now 5.9%.

Frankly they're having a laugh now.

Edited by Deep Thought on Thursday 18th October 13:59

But the 0% offers are usually smoke and mirrors.

45% deposit, 50% Balloon payment at the end of term. 5% spread over 24 months 'at 0%'.

The latest one on the 3 series isnt. Normal terms PCP. Minimal deposit. Usual discounts avail.

They're doing it on M3s too

https://offers.bmw.co.uk/finance-offers/result/?of...

Edited by Deep Thought on Thursday 18th October 14:16

[Deep Thought]

Edible Roadkill said:

piston25m said:

Edible Roadkill said:

But they have their own finance arm of the company now they are in their own rights a bank. So why wouldn't they want to monopolise on used credit as well as new??

I suspect so people come into the dealership looking at used cars and leave with a new car. I could have a used one for £300 a month and £3000 down, or a new one for the same amount.

Trouble is we have a huge used car market flooded with ex-PCP cars and no one to sell them to. What will happen with that I don't know.

Clearly this is what happens as I see evidence to support this all the time I'm just at a loss as to how it's tangable business plan. The used cars must need to be resold and filtered out somewhere.

It works at the moment because people "assume" that a used car PCP will work out cheaper than a new car one, by virtue of lower price of the car, however often it doesnt (on PCP terms anyway).

Likewise there are a lot of people who "only ever buy at a year old because the car has lost its initial depreciation" and then compare their "saving" to list price.

How long that can continue though, who knows.

[captain_cynic]

Edible Roadkill said:

But they have their own finance arm of the company now they are in their own rights a bank. So why wouldn't they want to monopolise on used credit as well as new??

If they were reasonably competitive I'd maybe think about using them but at 12.4% I'd frankly prefer to nail my nob to their burning showroom and drive away in my old but paid for car.

Edited by Edible Roadkill on Thursday 18th October 14:03

There are more risks carried with used cars and it costs a lot to repo a car, often you will not get you money back on repossessing it. I'm not sure exactly why BMWFS don't want to finance used cars, but it's obvious they don't.

Something running a business taught me is that not every customer is worth it. In fact you need to learn to spot and distance yourself from toxic customers who'll cost you more in time (time you cant spend with a better customer) and stress.

[Mandat]

Edible Roadkill said:

Why the heck do people still PCP ???

There are pros and cons with all of the methods of financing a car, even when paying in cash.

PCP works differently to leasing, which is why it will appeal to some people and not to others.

A big part of the problem is that lots of people don't understand how it actually works.

[Baron von Teuchter]

piston25m said:

Baron von Teuchter said:

12.4%?! :eek

It's true, I was looking a financing a used M235i. I don't understand how they actually get people to borrow money at this interest rate, but here were are.

I suspect it's a stupid-tax, knowing full well that some people will just look at the monthly cost and get all giddy at buying their £40k car for "only £400/month".

[Edible Roadkill]

BMW car prices have obviously taken an excursion north over the past x number of years in order to support the zero finance.

Maybe just me but I just don't find an outgoing model 320d saloon priced at 35k including a 7k contribution a bargain in any shape or form.

0 finance and dealer contributions is just waffle if the items priced in the clouds. Might as well make it £1m with a 950k contribution and -20% Apr for all intensive purposes....see how many imbeciles they get crawling through the letter box wanting one because it's only 420 a month init.

Edited by Edible Roadkill on Thursday 18th October 14:25

[Deep Thought]

captain_cynic said:

Edible Roadkill said:

But they have their own finance arm of the company now they are in their own rights a bank. So why wouldn't they want to monopolise on used credit as well as new??

If they were reasonably competitive I'd maybe think about using them but at 12.4% I'd frankly prefer to nail my nob to their burning showroom and drive away in my old but paid for car.

Edited by Edible Roadkill on Thursday 18th October 14:03

There are more risks carried with used cars and it costs a lot to repo a car, often you will not get you money back on repossessing it. I'm not sure exactly why BMWFS don't want to finance used cars, but it's obvious they don't.

Something running a business taught me is that not every customer is worth it. In fact you need to learn to spot and distance yourself from toxic customers who'll cost you more in time (time you cant spend with a better customer) and stress.

I think they're very happy to finance used cars, its just now they insure its on very much preferential terms for them. If they finance a new car, then they get the sale and profit of a new car too. On a used car they dont.

[anonymous-user]

ITP said:

Sheepshanks said:

Brooking10 said:

ITP said:

Not sure the word ‘deposit’ is quite correct when it comes to the world of car financing.
Let’s face it, no-one ever gets their ‘deposit’ back after 3 years.
Range Rover man mentioned earlier certainly doesn’t get his £20k back if he decides to hand back after 3 years of paying 800/month.

It’s entirely correct.

A deposit is a sum of money paid over to secure a transaction.

Nothing about the word deposit implies a return of the amount paid over.

Unless you are confusing cars for 1970s lemonade bottles ?

If you rent/hire something then you generally pay a deposit which you get back when the item is returned. So it's not difficult to imagine why some, perhaps less worldly, people would think they'll get their PCP deposit back.

I know several people who have been utterly convinced they would get the money back, either explicitly, or as overage on the car's value, when the deal ended. They all ended up disappointed - one was pretty devasted that she'd "lost" the entire value of the value of her old car that she p/x'd.

And this is why some people need protecting from themselves, as they don’t realise the true cost of what they are signing up to.
You could say it’s their own stupid fault, but many people are too easily tempted by a low monthly headline figure and the promise of a shiny new car.
Plus they are brainwashed into believing cars out of warranty immediately explode and are totally obsolete.

What do you think would happen if it became advertising law that any car finance deal could only be shown with zero deposits, just 24/36/48 straight payments based on 10k/year mileage as a default?
(Only the small print saying see your dealer for lower/higher miles, upfront payments etc.)

Many people may think a bit harder about it once the smoke has blown away, the mirrors cracked and the true price is in big bold type.

Which is exactly why, as I have said repeatedly, any investigation willl likely conclude on the issue of how the product is sold as opposed the validity of the core product.