Will Coronavirus hit used car prices?
Discussion
jammy-git said:
A quick Google suggests there are roughly 11m mortgages in the UK. So nearly 20% have taken a payment holiday!
It is not however an interest 'holiday'. All the borrowers who have decided to take a payment holiday (a rather unfortunate expression I think), are just actually increasing their debt load in the future. If they cannot manage on furlough, for example, they are going to be be deep in if redundancy occurs. Leads me to believe demand will soften dramatically for a new car, and prices will adjust accordingly.jammy-git said:
Deep Thought said:
Interesting insight here from Nationwide about the profile of people applying for payment breaks to mortgages and loans.
https://www.bbc.co.uk/news/business-52847131
Mr Garner said that 280,000 of its members had taken a payment break, the vast majority of which were mortgage holders.
"Probably the very first people to apply would be those who are really on top of their financial position and we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity," he said.
Of further interest -
"The UK banking sector has approved 1.8 million mortgage holidays during the crisis, according to figures from trade body UK Finance.
There have also been 877,800 freezes on credit cards, up 26% since the start of the month, and 608,000 payment holidays on personal loans, up 30% over the same period."
So not just affecting the car industry.
A quick Google suggests there are roughly 11m mortgages in the UK. So nearly 20% have taken a payment holiday!https://www.bbc.co.uk/news/business-52847131
Mr Garner said that 280,000 of its members had taken a payment break, the vast majority of which were mortgage holders.
"Probably the very first people to apply would be those who are really on top of their financial position and we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity," he said.
Of further interest -
"The UK banking sector has approved 1.8 million mortgage holidays during the crisis, according to figures from trade body UK Finance.
There have also been 877,800 freezes on credit cards, up 26% since the start of the month, and 608,000 payment holidays on personal loans, up 30% over the same period."
So not just affecting the car industry.
Edited by Deep Thought on Friday 29th May 14:19
The problem may come later as there is no free lunch and there could be many “zombie workers” with no jobs to go back to when the furlough ends.
tinyboytim said:
It is not however an interest 'holiday'. All the borrowers who have decided to take a payment holiday (a rather unfortunate expression I think), are just actually increasing their debt load in the future. If they cannot manage on furlough, for example, they are going to be be deep in if redundancy occurs. Leads me to believe demand will soften dramatically for a new car, and prices will adjust accordingly.
Though straight from the horses mouth as it were from the report above "we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity"Deep Thought said:
Though straight from the horses mouth as it were from the report above "we know there are a lot of people who have taken them as a precaution, and will go back to paying in full at the first opportunity"
Well that first opportunity to service their debt load will come sooner than they think, whether they still have a job or not. The 'precaution' has just delayed the inevitable as the debt has grown and they will still have to service it. Buying a car will have slipped a little further down the list of must do's for that 20% of mortgage holders.tinyboytim said:
I sense that access to credit will be harder to come by very soon. Have you seen the profit warnings and share price of the main financial institutions recently. Not good. Their operating margins will need to increase. Bad news for lenders. Bad news for cheap car deals. Less demand going forward.
I have very good credit rating and had a Paypal credit limit of £5500.I never asked for it from Paypal and it just appeared in my account one day a couple of years ago .
I only used it once and paid it all off in full within a month but out of the blue last week, they emailed saying they were reducing the limit from the £5500 to £1500 now even though nothing has changed on my credit report for some time so yeah, looks like big companies will be limiting credit.
kambites said:
I wonder if everyone who's taking a payment holiday realises that after it ends, they'll be paying more per month than if they hadn't taken it. You'd hope the banks have explained it...
The consumers won’t of heard that and will no doubt feel hard done by and want compensation to cover it. kambites said:
But on the other hand, how many people will have decided to keep their existing car rather than replacing it with a brand new one, thus stifling supply of second hand vehicles; or have decided to buy a second-hand car instead of a new one due to change in circumstances.
The current situation will put pressure on the second hand market in both directions; I don't think it's at all clear which pressure will have the greater effect. I rather suspect the overall effect will be pretty small either way.
From a personal standpoint I hope prices do fall because our family car is reaching the end of its life and needs replacing. I can see no evidence of it happening so far, though.
I welcome this sort of balanced view. Nobody can say which way the market will head with different forces in play. I suspect used car prices will still fall because 20% of the population will have no choice but sell up and a large proportion will scale back and sell their second / their household car to reduce outgoings and the need for them isn't there anymore due to WFH / redundancies. The current situation will put pressure on the second hand market in both directions; I don't think it's at all clear which pressure will have the greater effect. I rather suspect the overall effect will be pretty small either way.
From a personal standpoint I hope prices do fall because our family car is reaching the end of its life and needs replacing. I can see no evidence of it happening so far, though.
Edited by kambites on Friday 29th May 12:16
kambites said:
I wonder if everyone who's taking a payment holiday realises that after it ends, they'll be paying more per month than if they hadn't taken it. You'd hope the banks have explained it...
Not necessarily true with every payment holiday though as some car payments are actually a free 3 month holiday for nothing with just an extension of 3 months on to the term. Win win as will not affect credit rating either. Also some PCH car lease deals eg Vwfs are offering 3 months free when you order by saying nothing to pay at all in month 2,3 and 4 payments. Bonus even if not affected by covid.......yet
kambites said:
I don't think anyone is doubting that disposable income is going to be hit. The question is whether that has a positive negative impact on used car prices.
Historically, used car prices fall during recessions. The primary reason being actual or potential reduced disposable income far outweighs other individual factors. This recession is going to be deep and prolonged and any CV19 unique factors such as a move away from public transport will be outweighed by WFH, potential double digit unemployment and a steady claw back of Govt support £ billions through increased taxation, public sector wage freezes etc.Vested interest parties, always looking to bolster used car prices, usually quote individual factors for a biased agenda whilst ignoring the bigger economic picture.
Throttlebody said:
Historically, used car prices fall during recessions. The primary reason being actual or potential reduced disposable income far outweighs other individual factors. This recession is going to be deep and prolonged and any CV19 unique factors such as a move away from public transport will be outweighed by WFH, potential double digit unemployment and a steady claw back of Govt support £ billions through increased taxation, public sector wage freezes etc.
Vested interest parties, always looking to bolster used car prices, usually quote individual factors for a biased agenda whilst ignoring the bigger economic picture.
To be fair the used market does need a fall, its been over indexed since the rise of PCP, but firstly finance companies will need to take a bath. You can already see the residuals decreasing to more realistic levels, eg the Tiguan Match last year was 14k residual but is now at 11. That means higher monthlies since RRP and savings havent come down, but I cant see people taking it up. Other issue is the euro fine, MX5 in 18 was £18995, now its £23995 since Jan. The whole industry is dominated by so many variables, its hard to see both a crash, or a maintenance of price. Only thing I can personally see is more players leaving the market, or drastically reducing their offerings. Thats already the case with a lot of companies because of WLTP, so it seems in this eta we as customers are being given far less choice.Vested interest parties, always looking to bolster used car prices, usually quote individual factors for a biased agenda whilst ignoring the bigger economic picture.
Throttlebody said:
Vested interest parties, always looking to bolster used car prices, usually quote individual factors for a biased agenda whilst ignoring the bigger economic picture.
Broken record. It is all in your head. Not everyone is as biased as you fortunately. But I guess we will never know why you are so anti car sales industry / people.
Why do you care? What's your problem? There must be an underlying reason why you are so pissed off about a particular industry.
nickfrog said:
Broken record. It is all in your head. Not everyone is as biased as you fortunately.
But I guess we will never know why you are so anti car sales industry / people.
Why do you care? What's your problem? There must be an underlying reason why you are so pissed off about a particular industry.
Chill out and open a bottle of cheap plonk, put on magic radio and enjoy this fabulous time to be alive! But I guess we will never know why you are so anti car sales industry / people.
Why do you care? What's your problem? There must be an underlying reason why you are so pissed off about a particular industry.
Is anyone tracking autotrader ad volumes private versus trade.(35,634 - 486,371)
I think that might give some early pointers (especially the private sales), numbers increasing a lot will indicate some attempts at selling off and/or reduced demand and potentially mean over the weeks that pass the most desperate might be forced to reduce the prices, at present with the support and dealers holding firm I can't see why anyone would go too low yet?
if they do end up dropping I'd argue it wouldn't be showing it's head much yet? A lot depends on the public's mood, while there are varying opinions on here, it would seem that not many are shifting their plans to take up buying a car it's seems more status quo/sitting on your hands at best? There could just be a real stagnation of transactions.
If people on mass just keep what they have, and perhaps decide to go semi shed after a pcp/lease ends etc then at some point main dealers or, independents or private people will 'crack' and you may get a sliding of prices.
Pick any car and there's a natural churn depending on a host of factors, if the time from advert to sale increases significantly it'll put pressure on a drop. I bet there are some makes and models (Bentley Continental topic) that have barely any buyers actively looking for them, we are used to selling are cars reasonably easily but some may really struggle to find a buyer at almost any price, or certainyl at any price much above the lowest 'not complete wreck'?
I think that might give some early pointers (especially the private sales), numbers increasing a lot will indicate some attempts at selling off and/or reduced demand and potentially mean over the weeks that pass the most desperate might be forced to reduce the prices, at present with the support and dealers holding firm I can't see why anyone would go too low yet?
if they do end up dropping I'd argue it wouldn't be showing it's head much yet? A lot depends on the public's mood, while there are varying opinions on here, it would seem that not many are shifting their plans to take up buying a car it's seems more status quo/sitting on your hands at best? There could just be a real stagnation of transactions.
If people on mass just keep what they have, and perhaps decide to go semi shed after a pcp/lease ends etc then at some point main dealers or, independents or private people will 'crack' and you may get a sliding of prices.
Pick any car and there's a natural churn depending on a host of factors, if the time from advert to sale increases significantly it'll put pressure on a drop. I bet there are some makes and models (Bentley Continental topic) that have barely any buyers actively looking for them, we are used to selling are cars reasonably easily but some may really struggle to find a buyer at almost any price, or certainyl at any price much above the lowest 'not complete wreck'?
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