Are the wheels about to fall of car finance?

Are the wheels about to fall of car finance?

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Discussion

HungParlay

3 posts

Wednesday 6th November
quotequote all
This is an old thread but if anyone still watches it,

the recent Bristol Diesel Ban vote and people with PCPs on diesels

discuss

(first time poster long time lurker wink )

Drumroll

1,525 posts

67 months

Wednesday 6th November
quotequote all
Why would it affect them? You will have a choice if you use it (go into "central" Bristol) or not.

A1VDY

917 posts

74 months

Wednesday 6th November
quotequote all
4941cc said:
patch5674 said:
“PCP started at the premium end about 10 years ago, partly because of changes to the way that company cars were taxed. Since then it has spread to the mass market,” says Trevor Finn, chief executive of car dealership chain Pendragon.
He's got that arse about face, Ford introduced the PCP nearly 25 years ago, branded as Ford Options 1-2-3, their volume competitors took on the idea to remain competitive, the premium brands followed soon after. Not long after that, the 3 Series outsold the Mondeo and its equivalents from Audi and Merc combined to render the mid size saloon from a volume brand practically irrelevant, the near extinction of the 406/Xantia/Laguna/Mondeo/Vectra segment was a consequence.

That unprecedented volume hugely increased the German brands' presence and profitability, producing money from which they could diversify from a relatively small range of saloons and estates into every market sector you can think of and invented a few more along the way and here we are, with a great number of people all rolling the log to create the illusion of wealth when their real financial position is often bloody terrifying.

I've spent the last 17 years making a living from keeping those logs rolling, but the amounts of people coming into showrooms now in large piles of negative equity, thinking they can change their cars almost whimsically are un-nerving. The most common situations resulting in no deals now are those who think they can change for a new car that's the same or better than their current one (usually around 2 years into a 4 year PCP, taken out with low or no deposit last time), with no cash in and with ideally a lower monthly repayment.

"I'd like a bigger house in a nicer area, without putting any money in, negative equity in my house and struggling to make my current mortgage payments as it is please Mr. Estate Agent, what can you show me?" People understand that analogy, but lose all concept of it when its applied to something shiny with four wheels.

PCPs work best by running the full term. Want to change every 2 years? Fine, take a two year PCP. Don't take a 4 year one for the lowest repayment and then come back two years later and get the arse with me because you're upside down.

We're reaching the point now where even busting out a deal for 0.5-1.5% retained margin doesn't give enough discount to offset their neg egg and of course they haven't got any savings to cover that portion which we can't. This is where we got to around ten years ago too. Before everything *corrected* itself.

So yes, the wheels are wobbling a bit.

The problem is that people have got used to it and have a hard time when confronted with the reality of their budget vs. aspiration and have to consider either going for a lower spec model, or one from lower in their preferred manufacturer's range or worse still, having to trade down to a volume brand and find some justification to people as to why they've "downsized" and lost face in the race with the Joneses (who are also having the same dilemma, but don't want you to realise it...).
Great Post, summed up perfectly..

Deep Thought

23,902 posts

144 months

Wednesday 6th November
quotequote all
HungParlay said:
This is an old thread but if anyone still watches it,

the recent Bristol Diesel Ban vote and people with PCPs on diesels

discuss

(first time poster long time lurker wink )
Not an issue - and why would it be?

Not happening to 2021 at the earliest, and no different than anyone else having a car bought with cash or finance and having to look at their medium to long term options.

Fckitdriveon

307 posts

37 months

Wednesday 6th November
quotequote all
A1VDY said:
4941cc said:
patch5674 said:
“PCP started at the premium end about 10 years ago, partly because of changes to the way that company cars were taxed. Since then it has spread to the mass market,” says Trevor Finn, chief executive of car dealership chain Pendragon.
He's got that arse about face, Ford introduced the PCP nearly 25 years ago, branded as Ford Options 1-2-3, their volume competitors took on the idea to remain competitive, the premium brands followed soon after. Not long after that, the 3 Series outsold the Mondeo and its equivalents from Audi and Merc combined to render the mid size saloon from a volume brand practically irrelevant, the near extinction of the 406/Xantia/Laguna/Mondeo/Vectra segment was a consequence.

That unprecedented volume hugely increased the German brands' presence and profitability, producing money from which they could diversify from a relatively small range of saloons and estates into every market sector you can think of and invented a few more along the way and here we are, with a great number of people all rolling the log to create the illusion of wealth when their real financial position is often bloody terrifying.

I've spent the last 17 years making a living from keeping those logs rolling, but the amounts of people coming into showrooms now in large piles of negative equity, thinking they can change their cars almost whimsically are un-nerving. The most common situations resulting in no deals now are those who think they can change for a new car that's the same or better than their current one (usually around 2 years into a 4 year PCP, taken out with low or no deposit last time), with no cash in and with ideally a lower monthly repayment.

"I'd like a bigger house in a nicer area, without putting any money in, negative equity in my house and struggling to make my current mortgage payments as it is please Mr. Estate Agent, what can you show me?" People understand that analogy, but lose all concept of it when its applied to something shiny with four wheels.

PCPs work best by running the full term. Want to change every 2 years? Fine, take a two year PCP. Don't take a 4 year one for the lowest repayment and then come back two years later and get the arse with me because you're upside down.

We're reaching the point now where even busting out a deal for 0.5-1.5% retained margin doesn't give enough discount to offset their neg egg and of course they haven't got any savings to cover that portion which we can't. This is where we got to around ten years ago too. Before everything *corrected* itself.

So yes, the wheels are wobbling a bit.

The problem is that people have got used to it and have a hard time when confronted with the reality of their budget vs. aspiration and have to consider either going for a lower spec model, or one from lower in their preferred manufacturer's range or worse still, having to trade down to a volume brand and find some justification to people as to why they've "downsized" and lost face in the race with the Joneses (who are also having the same dilemma, but don't want you to realise it...).
Great Post, summed up perfectly..
Very good post,

I recently reworked my friends agreement on an m4,
Upped his deposit , shortened his term so he wasn’t going to upside down for 3/4 of his agreement. He didn’t have a clue and left it entirely to me, the deal the dealership proposed was crap!

PCP works great If you know how to work it, It’s no surprise that people end up in a pickle when they don’t understand it half the time in the first place .


HungParlay

3 posts

Wednesday 6th November
quotequote all
Deep Thought said:
Not an issue - and why would it be?

Not happening to 2021 at the earliest, and no different than anyone else having a car bought with cash or finance and having to look at their medium to long term options.
well anything that's going to put people off buying diesel cars will increase their depreciation and then force people to up their repayments

this already happened to people after VW cheating emissions scandal, if cities start banning or even making rumblings of banning diesel cars it's going to lower their appeal and resale value

Dr Jekyll

18,108 posts

208 months

Wednesday 6th November
quotequote all
Am I right in thinking that most of those using PCP are in the kind of jobs that 25 years ago would have included company cars? Despite the impression given on PH the average person on £30K or so simply doesn't consider buying brand new and regards a 3 year old car as verging on extravagance.

Deep Thought

23,902 posts

144 months

Wednesday 6th November
quotequote all
HungParlay said:
Deep Thought said:
Not an issue - and why would it be?

Not happening to 2021 at the earliest, and no different than anyone else having a car bought with cash or finance and having to look at their medium to long term options.
well anything that's going to put people off buying diesel cars will increase their depreciation and then force people to up their repayments

this already happened to people after VW cheating emissions scandal, if cities start banning or even making rumblings of banning diesel cars it's going to lower their appeal and resale value
The value of used diesels is UP, because less new ones are being sold.

If peoples payments are up a bit, what odds? Not a deal breaker for most i'd have thought.

And used VW prices are not down anyway.

And those with PCP deals in place currently wont give a monkeys as they can hand the car back, irrespective of its value relative to the balloon payment.


832ark

875 posts

103 months

Wednesday 6th November
quotequote all
Dr Jekyll said:
Am I right in thinking that most of those using PCP are in the kind of jobs that 25 years ago would have included company cars? Despite the impression given on PH the average person on £30K or so simply doesn't consider buying brand new and regards a 3 year old car as verging on extravagance.
I’d love to be able to afford a 3 year old car!

Deep Thought

23,902 posts

144 months

Wednesday 6th November
quotequote all
Dr Jekyll said:
Am I right in thinking that most of those using PCP are in the kind of jobs that 25 years ago would have included company cars? Despite the impression given on PH the average person on £30K or so simply doesn't consider buying brand new and regards a 3 year old car as verging on extravagance.
Maybe.

I think PCP suits a lot of people as its a set monthly payment to cover the funding of their car.

HungParlay

3 posts

Wednesday 6th November
quotequote all
Deep Thought said:
HungParlay said:
Deep Thought said:
Not an issue - and why would it be?

Not happening to 2021 at the earliest, and no different than anyone else having a car bought with cash or finance and having to look at their medium to long term options.
well anything that's going to put people off buying diesel cars will increase their depreciation and then force people to up their repayments

this already happened to people after VW cheating emissions scandal, if cities start banning or even making rumblings of banning diesel cars it's going to lower their appeal and resale value
The value of used diesels is UP, because less new ones are being sold.

If peoples payments are up a bit, what odds? Not a deal breaker for most i'd have thought.

And used VW prices are not down anyway.

And those with PCP deals in place currently wont give a monkeys as they can hand the car back, irrespective of its value relative to the balloon payment.
UP? because less are sold!? if less are wanted then people not buying those second hand ones either

Deep Thought

23,902 posts

144 months

Wednesday 6th November
quotequote all
HungParlay said:
UP? because less are sold!? if less are wanted then people not buying those second hand ones either
Yes. The demand has fallen for NEW diesels, but has not dropped as much for USED diesels. Therefore prices of good, used diesels has remained firm and in many cases is UP.

If you think about it, someone may be wary about committing £30-40,000 on a new diesel as a fractional change in value could result in several thousand of a difference in value down the line. If someone is paying £10K for a 3 year old car though, they're probably not as concerned and / or are more likely to keep the car longer anyway.

Although i no longer trade, i do have access to some of my old trade auction accounts - clean diesels with history will make over trade book price no problem. Petrol variants attract a lot less interest.

Terminator X

8,075 posts

151 months

Wednesday 6th November
quotequote all
smartypants said:
Baron von Teuchter said:
hehe

The RR was just an example. There are lots of people with £100k cars and £250k houses up here. Nuts.
I've already said it in this thread, nothing adds up currently in my opinion. I have close friends and family doing exactly the same, but equally as has been said, that's they prerogative and if they value the shiny shiny, then cool. I did once.

Me, if I could afford the PCP payments of £100k driveway, I'd be overpaying the fk out of my mortgage and be mortgage free before the end of their inevitable second consecutive PCP deal.
[Prediction mode] You will be on your death bed with millions in the Bank but bored senseless [/Prediction mode]

TX.

R.Sole

10,378 posts

153 months

Wednesday 6th November
quotequote all
Modern diesels are an absolute liability unless you are doing at least 1 long journey a week (30/40 miles steady 50mph plus) due to the DPF.
I don’t know whether the wheels are about to fall of finance but cars are sticking to showroom floors and there is some huge discounts of the so called premium brands!

Deep Thought

23,902 posts

144 months

Thursday 7th November
quotequote all
Thought this was of interest.

Its an advert from a local newspaper that i found here, dated 3rd July 2003 - some 16+ years ago.



Interesting in that all those cars are advertised as a deposit plus monthly payment.

Some would have us believe thats a new thing.

Nickbrapp

3,017 posts

77 months

Thursday 7th November
quotequote all
HungParlay said:
This is an old thread but if anyone still watches it,

the recent Bristol Diesel Ban vote and people with PCPs on diesels

discuss

(first time poster long time lurker wink )
There’s a lot of people in the world who don’t live in Bristol.

I do wonder how they plan to play it when BRISTOL bus company still has 53 plate diesels with no DPFs chucking out soot all over the city centre, or how they plan to get the police there in their 330D or an ambulance to a sick person in Cabot circus in their Mercedes sprinter?

How about a shop waiting for a engineer to fix their freezer or a electrician to get the power back on?



Abarth595turismo

246 posts

12 months

Thursday 7th November
quotequote all
Deep Thought said:
Thought this was of interest.

Its an advert from a local newspaper that i found here, dated 3rd July 2003 - some 16+ years ago.



Interesting in that all those cars are advertised as a deposit plus monthly payment.

Some would have us believe thats a new thing.
HP has been on the go forever it’s the balloon that skews things for the non financial whizz kids.

Deep Thought

23,902 posts

144 months

Thursday 7th November
quotequote all
Abarth595turismo said:
HP has been on the go forever it’s the balloon that skews things for the non financial whizz kids.
it has yes, my point was though that some people had commented that cars were advertised now just as a deposit and the monthlies like that was a new thing.


gizlaroc

13,093 posts

171 months

Thursday 7th November
quotequote all
I bought my Audi A4 in 1996 and that was on a balanced lease payment scheme, which is deposit, monthlies and a final payment.

I bought an E46 318Ti in 2001 on a PCP from BMW Norwich.

I have not really known a time where finance was not part of car sales, I'm 46.

My old man bought his Merc E320 in 1994 in a similar way he said, he is sure that was deposit, monthlies and balloon. It was £36,000 at the time, we got the keys to our first house on the same day he picked that car up, our mortgage was £36,000 too.
He said there is no way he had £36k lying around.


Deep Thought

23,902 posts

144 months

Thursday 7th November
quotequote all
gizlaroc said:
I bought my Audi A4 in 1996 and that was on a balanced lease payment scheme, which is deposit, monthlies and a final payment.

I bought an E46 318Ti in 2001 on a PCP from BMW Norwich.

I have not really known a time where finance was not part of car sales, I'm 46.

My old man bought his Merc E320 in 1994 in a similar way he said, he is sure that was deposit, monthlies and balloon. It was £36,000 at the time, we got the keys to our first house on the same day he picked that car up, our mortgage was £36,000 too.
He said there is no way he had £36k lying around.
And from memory Ford were doing PCP deals from the mid 80s - Choices 123 i think it was called.