Are the wheels about to fall of car finance?

[wemorgan]

Bill said:

I've acknowledged that. I'm talking about equal monthly payments.

I'm a bit confused now. Can you give an example please, as to me the same monthly payments are only possible for different aged cars, which to my mind is not a relevant comparison.

Like for like with a new car for £30k over 3 years.

PCH deal will cost between £10k or £280/month and £12k or £330
or
Bank loan £30k is £920 over 3 yrs, or £370 over 10 yrs.

The 10yr loan is crazy when you then see that £44k is replayed over the loan.

So the monthly payments are only equal when you buy second hand. Then we're back to the obvious of new cars costing more than second hand.

[philmots]

nickfrog said:

Yipper said:

One thing is certain -- the vast majority of UK consumers on PCP and lease deals must be getting royally ripped off. Like, absolutely wallet-raped. Because when I check all the PCP and lease deals online and in showrooms, ~98% of them are overpriced and absolutely rubbish. If 70-80% of buyers are PCPing and leasing, that is a million people getting screwed over by dealers and manufacturers every year...

Have you got any data to back up your claims ?

Lease deals are yield managed so by definition, some deals are better than average, some deals are worse than average, think Easyjet. The average being very close to actual depreciation of the asset.

The majority of buyers are far more clued up than you think. If they're not, what do you care anyway ? It's the same thing irrespective of payment method : some people invest more time than others in due diligence, that's all.

Completely agree, I'm properly clued up when it comes to buying cars and I now have 2 leases.

I want new cars as I don't have the time to deal with the hassle of older ones, there's simply no cheaper way of doing it than the leases I've got.

The only caveat being, you can't be too picky on spec and have to go with what's a good deal at the time.

It works for me though, as I like a bit of variety and I don't give a st about 'image'

[Mandat]

Bill said:

Apart from a wedge of cash.

I know exactly where you are coming from, you are demonstrating the point I'm making. The car trade has shown people that they can get a new car for the same monthly payment, and persuaded them to ignore the fact that it ultimately costs them more.

And yes it's a new car. But that to me isn't worth it.

The wedge of cash that you have when you sell the car is just a part refund of your own cash that you had to use to purchase the car in the first place, but this is actually irrelevant if you want to make a meaningful comparison. The important bit is the amount of money that you have spent/lost during the term of the ownership.

The point is that irrespective of whether you buy / PCP / HP / lease / etc. there is always a cost of ownership.

This is why your initial statement that PCP / lease buyers have nothing to show for it at the end is wrong, because the same fundamental truth equally applies to those who purchased a car with cash at the outset.

[wemorgan]

Mandat said:

This is why your initial statement that PCP / lease buyers have nothing to show for it at the end is wrong, because the same fundamental truth equally applies to those who purchased a car with cash at the outset.

I think I now understand his viewpoint based on his last post. He doesn't value the extra cost of owning a new car from a second hand one. Fair enough. I'm just not sure saying "having nothing at the end to show for it" was the best way.

[Bill]

Mandat said:

This is why your initial statement that PCP / lease buyers have nothing to show for it at the end is wrong, because the same fundamental truth equally applies to those who purchased a car with cash at the outset.

Not really. After 3 years the people who took out a loan have a car worth roughly half what they've paid. Vs nothing but the "opportunity" to pay the remaining balance.

If you're going to buy new then leasing is a good way to go about it. If you want "a car" for £X pcm, it's expensive.

[anonymous-user]

Bill said:

If you're going to buy new then leasing is a good way to go about it. If you want "a car" for £X pcm, it's expensive.

Please use leasing and PCP correctly. PCP != leasing.

[novus]

This really is the most repetitive thread topic and even the people posting in the thread must think how can I reword what I put in the last thread that was damn near identical two weeks ago

[Bill]

mstrbkr said:

Please use leasing and PCP correctly. PCP != leasing.

The effects are similar.

[daemon]

768 said:

daemon said:

MuscleSaloon said:

LordLoveLength said:

In Steven Wards 'Dealers Diary' pages in the latest Car Mechanics magazine he comments on the record stock levels appearing at bca car auctions over the last month. He feels that this will be bad for residuals.

And yet average prices are up year on year and auction demand has remained strong.

More people year on year driving now, not less, so its not unsurprising.

...

Interesting, I thought the number of people taking driving tests had fallen in recent years. So is that a very recent change, or some other explanation like drivers from other countries?

Dont know where you're getting that from? Has been 400,000+ since 2009 with no sign of abating...

https://www.gov.uk/government/uploads/system/uploa...

[daemon]

RSK21 said:

ChemicalChaos said:

Go to somewhere like Bruntingthorpe. There's are tens of thousands of ex finance cars there, filling up the site quicker than they can be sold on

I'll lay odds most of those are fleet not consumer.

And that 99% of them are waiting to go to auctions where they'll be bought up by the trade, not waiting for private customers.

[daemon]

Bill said:

And yes it's a new car. But that to me isn't worth it.

To some people it is. And that doesnt make them wrong.

[djc206]

Bill said:

mstrbkr said:

Please use leasing and PCP correctly. PCP != leasing.

The effects are similar.

Depends what you PCP and from whom.

The mazda 2 I PCP'd in 2009 was £1k down, £94.51/month. I sold it at 18 months old , the total cost of 'ownership' was £800, I got all of my payments back and a small part of my minimal deposit. The depreciation worked out at less than £50/month. By contrast the piece of st second hand Punto I was running before was costing me more than that in repairs!

I just sold my RS4 which had £7k of equity in it. So in no way is a similar effect to leasing one.

[Mandat]

Bill said:

Mandat said:

This is why your initial statement that PCP / lease buyers have nothing to show for it at the end is wrong, because the same fundamental truth equally applies to those who purchased a car with cash at the outset.

Not really. After 3 years the people who took out a loan have a car worth roughly half what they've paid. Vs nothing but the "opportunity" to pay the remaining balance.

If you're going to buy new then leasing is a good way to go about it. If you want "a car" for £X pcm, it's expensive.

Yes, really.

You've obviously not understood, and I apologise if I'm not being clear enough.

To help, here is a simple example based on notional figures to illustrate the point that you are missing.

Car A is bought for £20k cash and is sold for £10k at 3 years old. Owner spends £10k over the term and has no car at the end.

Car B is bought on a PCP finance deal and is handed back at 3 years old. Owner spends £10k over the term and has no car at the end.

Which of these owners has something to show at the end, and which of the owners have nothing to show at the end?

Before the pedants jump in, this example is simplified to show the point. Real world figures may be different depending on the circumstances of each particular deal, but the fundamental point still stands.

[ashleyman]

I have a Golf R on a PCP. When I was looking to buy it was cheaper for me to buy Brand New than it was Used. I got a good discount on mine, plus the interest rates on the new car were 4.8% compared to 10.9% on Used.

If that continues then people will just buy new and 2 Year old used cars will end up rotting on an airfield somewhere.

[Mandat]

Don't worry.

The likes of Bill don't see the value or benefit in buying brand new, therefore there will always be people like him who will keep the used car market going.

[gizlaroc]

Mandat said:

PCP finance is fairly similar to HP, but with the option of paying or not paying the optional final payment. Some people prefer the flexibility that this provides, and some don't.

The problem you have now, more so on used cars, is you pay more in interest than the final payment, and that is what people need to be careful of.

Just the other night a mate was banging on about how he managed to get £4k off a used 530d, however, he is paying £11k in 'extra' interest buying using BMWs PCP scheme compared with using someone like Blackhorse, Lombard or Hitachi Capital Finance.

All he saw was the monthly amount, he kept saying "I don't care if I don't own it, I know it is costing me £450 a month and I am happy with that."
This to me is the problem with PCP currently, extortionate interest rates are being hidden in monthly payments.


PCP used to be around 4-5% apr 10 years or so ago, new or used, that is when interest rates were at around 4-5%, which was fair enough. But now on used cars most tend to be between 10.9 and 12.9%, with interest rates (LIBOR) at around 0.75%.
People pay out for 36 or 48 months and throw the keys back, they could have paid the car off if they had proper financial advice, and that is the important bit.
I think we will look back at this and the question will be "We the customers explained to properly about the finance they were being sold?" I don't think they are.

[djc206]

ashleyman said:

I have a Golf R on a PCP. When I was looking to buy it was cheaper for me to buy Brand New than it was Used. I got a good discount on mine, plus the interest rates on the new car were 4.8% compared to 10.9% on Used.

If that continues then people will just buy new and 2 Year old used cars will end up rotting on an airfield somewhere.

Those are the dealer rates for second hand cars. Unless you've got a terrible credit history you can get better rates elsewhere or do as many do and take bank loans at very low rates. And as some on this thread point out there are people who just don't like financing anything and pay cash for cars, I know my grandparents were of that ilk.

Second hand cars will always be popular because of the depreciation curve. With longer warranties becoming common there isn't the mechanical worry that accompanies owning a used car either.

Personally I like having new cars but I'm under no illusions and know that what I'm doing is more expensive than buying second hand in most cases.

[Mandat]

gizlaroc said:

The problem you have now, more so on used cars, is you pay more in interest than the final payment, and that is what people need to be careful of.

Just the other night a mate was banging on about how he managed to get £4k off a used 530d, however, he is paying £11k in 'extra' interest buying using BMWs PCP scheme compared with using someone like Blackhorse, Lombard or Hitachi Capital Finance.

All he saw was the monthly amount, he kept saying "I don't care if I don't own it, I know it is costing me £450 a month and I am happy with that."
This to me is the problem with PCP currently, extortionate interest rates are being hidden in monthly payments.


PCP used to be around 4-5% apr 10 years or so ago, new or used, that is when interest rates were at around 4-5%, which was fair enough. But now on used cars most tend to be between 10.9 and 12.9%, with interest rates (LIBOR) at around 0.75%.
People pay out for 36 or 48 months and throw the keys back, they could have paid the car off if they had proper financial advice, and that is the important bit.
I think we will look back at this and the question will be "We the customers explained to properly about the finance they were being sold?" I don't think they are.

Well, of course there will be good deals and bad deals, and everyone needs to make their own assessment as to what suits them.

Perhaps there ought to be some kind of intelligence test as part of the finance application process to ensure that people really do comprehend what they are signing up to.

[djc206]

gizlaroc said:

The problem you have now, more so on used cars, is you pay more in interest than the final payment, and that is what people need to be careful of.

Just the other night a mate was banging on about how he managed to get £4k off a used 530d, however, he is paying £11k in 'extra' interest buying using BMWs PCP scheme compared with using someone like Blackhorse, Lombard or Hitachi Capital Finance.

All he saw was the monthly amount, he kept saying "I don't care if I don't own it, I know it is costing me £450 a month and I am happy with that."
This to me is the problem with PCP currently, extortionate interest rates are being hidden in monthly payments.


PCP used to be around 4-5% apr 10 years or so ago, new or used, that is when interest rates were at around 4-5%, which was fair enough. But now on used cars most tend to be between 10.9 and 12.9%, with interest rates (LIBOR) at around 0.75%.
People pay out for 36 or 48 months and throw the keys back, they could have paid the car off if they had proper financial advice, and that is the important bit.
I think we will look back at this and the question will be "We the customers explained to properly about the finance they were being sold?" I don't think they are.

To be fair in my experience the dealers have run through the whole thing, the cost of the borrowing etc but simple folks like to boil things down to one figure which is the monthly. I wonder if they do the same with their mortgages?

I'm sure this exact scenario featured in a simpsons episode where Homer buys the Canyonero with the "crippling final payment".

[Mandat]

djc206 said:

Those are the dealer rates for second hand cars. Unless you've got a terrible credit history you can get better rates elsewhere or do as many do and take bank loans at very low rates. And as some on this thread point out there are people who just don't like financing anything and pay cash for cars, I know my grandparents were of that ilk.

Second hand cars will always be popular because of the depreciation curve. With longer warranties becoming common there isn't the mechanical worry that accompanies owning a used car either.

Personally I like having new cars but I'm under no illusions and know that what I'm doing is more expensive than buying second hand in most cases.

All true, but is all this really a new thing?

It seems to me that all that you say would equally apply to car sales since time immemorial.