Are the wheels about to fall of car finance?
Discussion
SpeedBash said:
The ECB closed its repo facility to auto finance ABS issuance which included residual value risk some time ago. It's not a new concern. SpeedBash said:
I really don't understand these statements: "A particular concern to the credit agencies are personal contract plans (PCPs) where drivers effectively lease the car for a set time and pay a monthly fee.
At the end of the deal, the car will still be worth a certain amount on the second-hand market. Owners use this money to pay off the rest of their contract and put anything left towards a deposit for another new vehicle.
Credit agency Moody’s warns that these types of deals are more risky than standard car loans because if the price of second-hand cars starts to fall then buyers will have smaller deposits and won’t be able to buy new cars. It warned that of the recent deals it had analysed, there were higher numbers of PCP deals bundled in to investments with other types of less-risky car loans."
Contradicts everything I know about the basis of PCPs with GFV etc. I understand the thinking that people won't be able to take on new PCPs if they don't get as much back in a deposit but that just means less PCPs and new car 'sales' in future - not some massive mis-selling scandal?
Edited by Olf on Friday 26th May 08:47
Olf said:
I really don't understand these statements:
"A particular concern to the credit agencies are personal contract plans (PCPs) where drivers effectively lease the car for a set time and pay a monthly fee.
At the end of the deal, the car will still be worth a certain amount on the second-hand market. Owners use this money to pay off the rest of their contract and put anything left towards a deposit for another new vehicle.
Credit agency Moody’s warns that these types of deals are more risky than standard car loans because if the price of second-hand cars starts to fall then buyers will have smaller deposits and won’t be able to buy new cars. It warned that of the recent deals it had analysed, there were higher numbers of PCP deals bundled in to investments with other types of less-risky car loans."
Contradicts everything I know about the basis of PCPs with GFV etc. I understand the thinking that people won't be able to take on new PCPs if they don't get as much back in a deposit but that just means less PCPs and new car 'sales' in future - not some massive mis-selling scandal?
It's not a mis-selling story. A lot of those PCP deals have been securitised - the rights to the return of interest and principle on them have been bundled up into bonds and sold to investors. If the residual value of the cars at the end of the term takes a nose dive there's a risk that the investors are going to lose out. That's what Moodys is commenting on."A particular concern to the credit agencies are personal contract plans (PCPs) where drivers effectively lease the car for a set time and pay a monthly fee.
At the end of the deal, the car will still be worth a certain amount on the second-hand market. Owners use this money to pay off the rest of their contract and put anything left towards a deposit for another new vehicle.
Credit agency Moody’s warns that these types of deals are more risky than standard car loans because if the price of second-hand cars starts to fall then buyers will have smaller deposits and won’t be able to buy new cars. It warned that of the recent deals it had analysed, there were higher numbers of PCP deals bundled in to investments with other types of less-risky car loans."
Contradicts everything I know about the basis of PCPs with GFV etc. I understand the thinking that people won't be able to take on new PCPs if they don't get as much back in a deposit but that just means less PCPs and new car 'sales' in future - not some massive mis-selling scandal?
https://www.moodys.com/research/Moodys-UK-auto-ABS...
Lawyers gear up for a car loan misselling bonanza amid fears customers may have been misled over PCP deals
http://www.thisismoney.co.uk/money/markets/article...
http://www.thisismoney.co.uk/money/markets/article...
ReverseTriker said:
Lawyers gear up for a car loan misselling bonanza amid fears customers may have been misled over PCP deals
http://www.thisismoney.co.uk/money/markets/article...
Vultureshttp://www.thisismoney.co.uk/money/markets/article...
daemon said:
ReverseTriker said:
Lawyers gear up for a car loan misselling bonanza amid fears customers may have been misled over PCP deals
http://www.thisismoney.co.uk/money/markets/article...
Vultureshttp://www.thisismoney.co.uk/money/markets/article...
daemon said:
Milemuncher said:
Glad to see the Mail has finally caught up with this outrage. Their article demonstrates clearly that poor people (some of whom may even be immigrants - shock horror!) are now able to get hold of new cars.
It's an absolute scandal.
I despair at the quality of journalism huge numbers of the population subject themselves to - and worse, believe - every day.
It's an absolute scandal.
I despair at the quality of journalism huge numbers of the population subject themselves to - and worse, believe - every day.
It does read like that. These poor people simply shouldnt be "allowed" to drive a new car. How very dare they!
"Drivers earning £8,200 a year can buy a brand new £12,500 Ford Fiesta"
Oh the humanity!
Edited by daemon on Wednesday 17th May 21:43
king ridiculous state of affairs, wouldn't you agree?tannhauser said:
Well it is rather a fking ridiculous state of affairs, wouldn't you agree?
Indeed. These peasants need to know their place!king ridiculous state of affairs, wouldn't you agree?I've heard some of these peasants have bought homes worth many times their salary using "mortgages". f
king ridiculous state of affairs, wouldn't you agree?Edited by daemon on Sunday 28th May 20:36
Edited by daemon on Sunday 28th May 20:36
OddCat said:
The finance companies have nothing to fear as long a they have been (and can prove that they have been) completely clear, honest and above board........
The finance companies have nothing to fear. Period.People need to prove they were mis sold the product.
Have a read at what they are trying to make stick - people may "lose their deposit"
IF people were genuinely mis sold a particular product then fine, but imagine the bandwagon that people will jump on to here if they think there's a few £ in it for them - rallied of course by law firm vultures to believe they are victims
daemon said:
OddCat said:
The finance companies have nothing to fear as long a they have been (and can prove that they have been) completely clear, honest and above board........
The finance companies have nothing to fear. Period.People need to prove they were mis sold the product.
OddCat said:
daemon said:
OddCat said:
The finance companies have nothing to fear as long a they have been (and can prove that they have been) completely clear, honest and above board........
The finance companies have nothing to fear. Period.People need to prove they were mis sold the product.
These vultures are trying to whip up a scandal to make money off.
And sadly the UK com-pen-say-shun culture supports and thrives on it.
I'm surprised you can't see that.
I CAN see that. And I agree with you. Thats why I think the finance companies have something to fear. Government was happy to see lots if PPI claims as these injected £20bn + into a sick economy. I can't see PCP being any different. Most PPI claims were spurious. There were only a small proportion of genuine PPI mid selling cases (people for whom it was genuinely inappropriate). We live in a world where being right isn't enough.....
Very difficult to see a mis-selling scandal a la PPI
The issue with PPI was that it was being mis-sold (and everyone in the industry knew it). Not just the pricing but also that many borrowers would not have been able to claim on the product due to being self-employed or hitting other exclusions.
But what killed the lenders was that the regulators changed the rules retrospectively as to what information the lenders needed to have collected from the borrower. And of course most lenders didn't have that information (or in many cases couldn't find the original documentation to defend the case). Result has been a massive free-for-all
What is the basis for claiming mis-selling of PCP? It's a fairly simple product (a loan for a car but with a balloon payment/option to walk away at the end). And given pcp is a modern product, at least in the mass market, the lenders should have the documentation including your signature on a piece of paper saying it's all been explained to you
My guess is that the only grounds a borrower could have for recompense would be if they terminated their contract mid-term; they might possibly claim that they didn't know that there might be a shortfall between the loan and the value of the vehicle at that point. But it's a bit tenuous
Otherwise what could you claim was mis-selling? The car is worth £1000 less than you hoped it would be after 3-4 years? Suspect that will be given short shrift in court
The issue with PPI was that it was being mis-sold (and everyone in the industry knew it). Not just the pricing but also that many borrowers would not have been able to claim on the product due to being self-employed or hitting other exclusions.
But what killed the lenders was that the regulators changed the rules retrospectively as to what information the lenders needed to have collected from the borrower. And of course most lenders didn't have that information (or in many cases couldn't find the original documentation to defend the case). Result has been a massive free-for-all
What is the basis for claiming mis-selling of PCP? It's a fairly simple product (a loan for a car but with a balloon payment/option to walk away at the end). And given pcp is a modern product, at least in the mass market, the lenders should have the documentation including your signature on a piece of paper saying it's all been explained to you
My guess is that the only grounds a borrower could have for recompense would be if they terminated their contract mid-term; they might possibly claim that they didn't know that there might be a shortfall between the loan and the value of the vehicle at that point. But it's a bit tenuous
Otherwise what could you claim was mis-selling? The car is worth £1000 less than you hoped it would be after 3-4 years? Suspect that will be given short shrift in court
RobDown said:
Very difficult to see a mis-selling scandal a la PPI
The issue with PPI was that it was being mis-sold (and everyone in the industry knew it). Not just the pricing but also that many borrowers would not have been able to claim on the product due to being self-employed or hitting other exclusions.
But what killed the lenders was that the regulators changed the rules retrospectively as to what information the lenders needed to have collected from the borrower. And of course most lenders didn't have that information (or in many cases couldn't find the original documentation to defend the case). Result has been a massive free-for-all
What is the basis for claiming mis-selling of PCP? It's a fairly simple product (a loan for a car but with a balloon payment/option to walk away at the end). And given pcp is a modern product, at least in the mass market, the lenders should have the documentation including your signature on a piece of paper saying it's all been explained to you
My guess is that the only grounds a borrower could have for recompense would be if they terminated their contract mid-term; they might possibly claim that they didn't know that there might be a shortfall between the loan and the value of the vehicle at that point. But it's a bit tenuous
Otherwise what could you claim was mis-selling? The car is worth £1000 less than you hoped it would be after 3-4 years? Suspect that will be given short shrift in court
Thats exactly it. And at the end of term, you can just hand the car back anyway.The issue with PPI was that it was being mis-sold (and everyone in the industry knew it). Not just the pricing but also that many borrowers would not have been able to claim on the product due to being self-employed or hitting other exclusions.
But what killed the lenders was that the regulators changed the rules retrospectively as to what information the lenders needed to have collected from the borrower. And of course most lenders didn't have that information (or in many cases couldn't find the original documentation to defend the case). Result has been a massive free-for-all
What is the basis for claiming mis-selling of PCP? It's a fairly simple product (a loan for a car but with a balloon payment/option to walk away at the end). And given pcp is a modern product, at least in the mass market, the lenders should have the documentation including your signature on a piece of paper saying it's all been explained to you
My guess is that the only grounds a borrower could have for recompense would be if they terminated their contract mid-term; they might possibly claim that they didn't know that there might be a shortfall between the loan and the value of the vehicle at that point. But it's a bit tenuous
Otherwise what could you claim was mis-selling? The car is worth £1000 less than you hoped it would be after 3-4 years? Suspect that will be given short shrift in court
- no one told me that i wouldn't get my deposit back....
- I didn't realise I was paying interest on the whole value if the car....
- they told me that the guaranteed future value was the amount I'd get back....
- they told me that the guaranteed future value would be a lot more than the remaining balance so I'd get the difeence back at the end....
- I thought the car would be mine at the end but I'm now being told I have to pay a large sum to keep it...
- I'm a bit 'special' (retarded) I am - and I didn't understand what i was signing...
- I can't read so it wasn't fair.....
...this is just a small selection off the top of my head.....
- I didn't realise I was paying interest on the whole value if the car....
- they told me that the guaranteed future value was the amount I'd get back....
- they told me that the guaranteed future value would be a lot more than the remaining balance so I'd get the difeence back at the end....
- I thought the car would be mine at the end but I'm now being told I have to pay a large sum to keep it...
- I'm a bit 'special' (retarded) I am - and I didn't understand what i was signing...
- I can't read so it wasn't fair.....
...this is just a small selection off the top of my head.....
OddCat said:
- no one told me that i wouldn't get my deposit back....
- I didn't realise I was paying interest on the whole value if the car....
- they told me that the guaranteed future value was the amount I'd get back....
- they told me that the guaranteed future value would be a lot more than the remaining balance so I'd get the difeence back at the end....
- I thought the car would be mine at the end but I'm now being told I have to pay a large sum to keep it...
- I'm a bit 'special' (retarded) I am - and I didn't understand what i was signing...
- I can't read so it wasn't fair.....
...this is just a small selection off the top of my head.....
...and ALL of those are covered off in the documentation that you sign. - I didn't realise I was paying interest on the whole value if the car....
- they told me that the guaranteed future value was the amount I'd get back....
- they told me that the guaranteed future value would be a lot more than the remaining balance so I'd get the difeence back at the end....
- I thought the car would be mine at the end but I'm now being told I have to pay a large sum to keep it...
- I'm a bit 'special' (retarded) I am - and I didn't understand what i was signing...
- I can't read so it wasn't fair.....
...this is just a small selection off the top of my head.....
Stupidity is no excuse.
Its not a complicated idea. deposit, monthly payments, pay residual or hand it back. All explained in the paperwork
daemon said:
...and ALL of those are covered off in the documentation that you sign.
Stupidity is no excuse.
Its not a complicated idea. deposit, monthly payments, pay residual or hand it back. All explained in the paperwork
Well, time will tell. One of us will be proven to be wrong. I hope it is me - but I have a horrible feeling it won't be....Stupidity is no excuse.
Its not a complicated idea. deposit, monthly payments, pay residual or hand it back. All explained in the paperwork
OddCat said:
daemon said:
...and ALL of those are covered off in the documentation that you sign.
Stupidity is no excuse.
Its not a complicated idea. deposit, monthly payments, pay residual or hand it back. All explained in the paperwork
Well, time will tell. One of us will be proven to be wrong. I hope it is me - but I have a horrible feeling it won't be....Stupidity is no excuse.
Its not a complicated idea. deposit, monthly payments, pay residual or hand it back. All explained in the paperwork
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