Will Coronavirus hit used car prices?

Will Coronavirus hit used car prices?

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Deep Thought

35,724 posts

196 months

Thursday 28th May 2020
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Scootersp said:
The need for the payment holidays? you say it's for the finance houses, but ultimately it's to reduce missed payments, which suggest some of those with pcp's have cut it fine on their expenditure, they are fine for the monthly payment up until they very quickly are not. The trotted about line of some being jealous of others in a new cars that they feel they shouldn't be in has an air of truth in a financial sense, ie of course they can do what they like but there can be negative consequences if personal circumstances change.
I think the vast bulk of people who asked for and have availed of it have done so not because they need it, but because - as many people on here have said - they're being prudent and would rather have that extra cash in the bank or (b) because they can.

A friend of a friend (the brother of my wifes niece to be precise - i know him and i know the car) bought a new to them Audi A4 back in March, they made one payment and then were offered a 3 month payment holiday (i dont know if they instigated it or the finance company did) which they availed of, and now apparently hes been offered a further two months. Doesnt need it, has only made one payment on the car but quite happy to driving about in the car now for free for five months. No doubt he had to tick some box on a form to say he had been adversely affected by COVID-19.

No doubt thats happening all over the place. Yes, theres some people genuinely affected, and who genuinely "need" the payment break, but then lets be honest - theres people who dont have car finance who now other than furloughing would be in financial trouble themselves, and theres many businesses who i'm sure it could be argued should have had better cashflow that will now go to the wall because of this.

Its a difficult, once in a lifetime problem that many people including some with car finance, some with jobs that are now at risk and some with businesses that have hit a wall "could" have planned better for - in hindsight.

To single out people who have car finance as a category of person who "deserves to be punished" (often trotted out on here) by all of this is frankly cras..

The finance companies will bear the brunt of the problem - and i have no issue with that at all.

Scootersp said:
It's like your BMW, you didn't go 120d but neither did you go M3 M4 etc as the value for you wasn't there the 140i was enough or a good balance of various factors, what I'm saying is you could have stretched yourself further but erred on some level of caution but not total caution. Now take a different personality, or financial standing person and your car is a pipe dream, the cautious approach for them is a shed/semi shed, their equivalent of you might be a fairly new used Focus say and then their M3/4 might be that same Focus but brand new.

There are more of us on the bottom rungs looking up than in the mid range or upper car buying ranges, and the new market take up over the last couple of decades has to therefore have come more from getting the younger generations straight, or more quickly, into a new car, and doing deals for families and selling the safety and low monthly costs. Not everyone has the same self control and a number will push themselves to the M3/4 or new focus in these two scenarios and they will likely never get stopped in this day and age.

What I wonder could you have gone for before any finance place would have got twitchy?

Subprime is a hard thing to specifically quantify isn't it, as I doubt many default on month one! so for me it's just an overall sense that as I've tried to explain above the access to higher finance sums is generally open to far more people and overall I think a shift has occurred to too much of many people's money going on a car repayment. Large restraint is left in the hands of the individual not so much with the lenders?
Sub-prime is a specific term applied to an agreement in which a person is paying a higher rate of finance because they otherwise would have failed the lending criteria.

That is NOT the case with someone who walks in and gets finance on a Focus, BMW, M4 or whatever at the headline 0% or whatever rate.

Deep Thought

35,724 posts

196 months

Thursday 28th May 2020
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stevemcs said:
The ones likely to default won't be the ones signing up for new Audis and BMW's its the ones who have a 5 year old Golf purchased from under the arches where only blue or close brothers operate, the bigger companies such as Northridge are very fussy about what they will take on.

Other than within the airline and travel industry I don't see where large redundancies will come from, its still going to pick back up and will slowly get back towards where it was pre covid. Pubs and hotels if they can survive until July will be rammed over the summer months, social distancing will be forgotten come September
yes

Totally agree.

The first friday night the pubs reopen they'll be climbing over each other to get to the bar.


Deep Thought

35,724 posts

196 months

Thursday 28th May 2020
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Scootersp said:
I don't know specifics really how could I?
And then what percentage of people who DONT have car finance are now in diffs because they're about to get kicked off the furlough scheme and in to redundancy but could have prepared themselves better?

And what percentage of businesses that are now going to close could have been better prepared?

Who knows, but as Nick has said, its this notion that the vast majority of people who PCP cars "must" be living close to the edge.

Scootersp said:
but I think personal debt averages have grown, cars being part of that so more debt per person means more potential stress tests and failing of stress tests in extreme circumstances.
Yup, agreed. There are dumb people out there who have got themselves in to debt they shouldnt have and may now suffer the consequences.

Scootersp said:
I doubt it's a high percentage but if you're a business you'll always have bad debters and you have no choice but to absorb these 'costs' and so factor them in accordingly at some level, but then a percentage increase doesn't have to be that big to give a person or company issues.

And theres a percentage of small businesses and companies that were happily getting by that now will go to the wall. Are they to blame?

Throttlebody

2,348 posts

53 months

Thursday 28th May 2020
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Deep Thought said:
Sub-prime is a specific term applied to an agreement in which a person is paying a higher rate of finance because they otherwise would have failed the lending criteria.

That is NOT the case with someone who walks in and gets finance on a Focus, BMW, M4 or whatever at the headline 0% or whatever rate.
Wrong. Sub prime is a well known and used term in the Asset Backed Securitisation of PCP finance and the varying tranches of defined risk.

It defines the level of risk related to the categories of the borrowers. You are getting confused with monthly payments and APR, which are variable.


Earthdweller

13,429 posts

125 months

Thursday 28th May 2020
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Wooda80 said:
Just a thought:

If I get myself a new base model Audi every 3 years - just because I want to impress the neighbours or at least I believe I will - then is it ok to do that as long as I pay cash for it?

In other words, is it the percieved wasteful or friviolous consumerism that is at fault, or is it the fact that it's paid for out of revenue rather than capital?
Absolutely, of course you can

I’ve done it myself ( not white and not to impress )

Paying out of revenue is brilliant, but I hope you, like me have a sense of proportion about the figures involved

Sadly, many don’t and it’s a shame financial management isn’t taught at school

I’ve seen quite a few people I know get into significant difficulty over the cumulative payments they’ve signed upto

It’s only £50 here £100 there etc add it all up and suddenly it’s an “oh fk moment”

And when there’s a loss of earnings or a dip there is no resilience

TeaVR

1,217 posts

226 months

Thursday 28th May 2020
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Spoke to a dealer earlier on today.

Quote "I just can't get replacement stock. There's a shortage. If I was to give you a discount, it would cost me more to replace the car I sold to you"

Inky81

282 posts

95 months

Thursday 28th May 2020
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Finance companies 'bending over backwards' to offer payment holidays?

This is for 2 reasons.

1. The FCA instructed them to do so
2. The FCA/PRA also confirmed that agreed payment holidays and mid-term alterations won't count as 'bad debt', meaning Finance Coys capital ratios will be unaffected. You could argue that payment holidays are a bit like furloughing staff, it doesn't show as unemployment/unpaid debt yet, but it could.

Edited to add - this is pistonheads, so of course all finance is bad and evil....rolleyes

Anonymous-poster

12,241 posts

205 months

Thursday 28th May 2020
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If it is very few that need the payment holiday why would the finance companies need protection?

Deep Thought

35,724 posts

196 months

Thursday 28th May 2020
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Throttlebody said:
Wrong. Sub prime is a well known and used term in the Asset Backed Securitisation of PCP finance and the varying tranches of defined risk.

It defines the level of risk related to the categories of the borrowers.
Well known?

Your implication is always that PCP finance users are sub prime, but you have never been able to back that up.

Throttlebody said:
You are getting confused with monthly payments and APR, which are variable.
How and where are you drawing that conclusion from?

Deep Thought

35,724 posts

196 months

Thursday 28th May 2020
quotequote all
Inky81 said:
Finance companies 'bending over backwards' to offer payment holidays?

This is for 2 reasons.

1. The FCA instructed them to do so
2. The FCA/PRA also confirmed that agreed payment holidays and mid-term alterations won't count as 'bad debt', meaning Finance Coys capital ratios will be unaffected. You could argue that payment holidays are a bit like furloughing staff, it doesn't show as unemployment/unpaid debt yet, but it could.

Edited to add - this is pistonheads, so of course all finance is bad and evil....rolleyes
Finance companies do not want these cars back. They do not want people to be VTing in their droves, they do not want cars to be handed back at the end of the term (quite possibly worth a lot less than the residual value set) and they do not want to have to chase people for a missed payment or escalate to a repossession.

It very very much suits the finance companies.

Granted, it will help individuals too but the pressure here is on the finance companies.

Scootersp

3,107 posts

187 months

Thursday 28th May 2020
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Deep Thought said:
To single out people who have car finance as a category of person who "deserves to be punished" (often trotted out on here) by all of this is frankly cras..
look this is not me, I have no axe to grind, no anti finance gene, not a care in the world what anyone else drives, would never look down on a Micra driver or deride someone who's pushed themselves too far to own a car the really wanted. I'm a live and let live guy, but society wise we have controls on stuff that is a risk to yourself or others and I see the credit risk has slackened off over time and this can be a problem and/or temptation.

I'm not throttlebody even if our views overlap, the situation is not black and white, you've got millions of folks doing different things, I'm simply saying if you loosen lending criteria like has happen in our lifetimes you will get people more people taking on more debt and therefore at times more struggling under the weight of it. So overall on average we are as a society more burdened with debt and less able to cope with blips.

I'm not saying any business could be prepared for what's happened, a hundred year event was a quoted phrase, and support is needed and has been provided, but a single person losing their source of income is a possibility at anytime, I dare say we've all had such a time or at least had the threat of it and in normal times you get little to no help. Everyone will adapt to whats thrown at them in a crisis you prioritise and get things in order/do what you need to do, but that won't be helped by finance commitments?

I genuinely think lots of people would be happier without financing anything and would also largely not be missing out much compared to being able too.

I think i'm going to just observe again from now as most posters are totally entrenched and little snips and counters just flare up........and you get multi quoted to death with some serious reading between lines and 2 + 2 =5 etc.

Good luck to all getting through this and driving the car of your choice funded the way you see fit for years to come......



zainster

440 posts

175 months

Thursday 28th May 2020
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Jules Sunley said:
Throttlebody said:
Good work. Just shows at what level WBAC is operating.
Thanks. Just had an email from them upping by £500 so definite game playing but still way off the mark
So I bought my C63S AMG coupe 4 months ago.
A week before the lockdown, I obtained a WBAC valuation that was approx. 12% less than what I'd paid for it.

I then tried a Mini main dealer, looking to part ex against a much cheaper car, they offered even less then WBAC despite on inspection, commenting the cars was great throughout and ready for retail already.

Fast forward post lockdown and so a week ago, I tried Motorway, who advertise your car to traders to bid on through their internal site. Was told market has been doing well and probably explains why I ended up selling the car for 97% of the purchase price I'd paid for it 4 months earlier. Car paid in full on collection earlier this week. One Happy bunny!


Throttlebody

2,348 posts

53 months

Thursday 28th May 2020
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Deep Thought said:
Throttlebody said:
Wrong. Sub prime is a well known and used term in the Asset Backed Securitisation of PCP finance and the varying tranches of defined risk.

It defines the level of risk related to the categories of the borrowers.
Well known? But noone here has heard of it.

Your implication is always that PCP finance users are sub prime, but you have never been able to back that up.

Throttlebody said:
You are getting confused with monthly payments and APR, which are variable.
How and where are you drawing that conclusion from?
biggrin It’s was even referred to in your links earlier. You are getting confused with sub prime mortgages and the differences between the term applied to either borrowers or lenders products.

Sub prime is used by PCP ABS to define one of the levels of potential default risk of the borrower. When loans are packaged up into tranches it allows, in simple terms, a degree of definition on where the risk sits. Default being the key word.

And as always you don’t read what I say. My initial comment sparking this off was ‘sub prime selling’ you changed it to ‘sub prime lending’. Even now you are suggesting above that I said ‘PCP users are sub prime’ An element of them are. Take more time to read what people are saying rather than what your imagination seems to conjures up.

Anonymous-poster

12,241 posts

205 months

Thursday 28th May 2020
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zainster said:
So I bought my C63S AMG coupe 4 months ago.
A week before the lockdown, I obtained a WBAC valuation that was approx. 12% less than what I'd paid for it.

I then tried a Mini main dealer, looking to part ex against a much cheaper car, they offered even less then WBAC despite on inspection, commenting the cars was great throughout and ready for retail already.

Fast forward post lockdown and so a week ago, I tried Motorway, who advertise your car to traders to bid on through their internal site. Was told market has been doing well and probably explains why I ended up selling the car for 97% of the purchase price I'd paid for it 4 months earlier. Car paid in full on collection earlier this week. One Happy bunny!
Great result.

stevemcs

8,592 posts

92 months

Thursday 28th May 2020
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Subprime is a below-average credit classification of borrowers with a tarnished or limited credit history, and which are subject to higher than average interest rates. Lenders will use a credit scoring system to determine which loans a borrower may qualify for (taken from the interweb)


Subprime applies to finance not the type of loan

growlerowl

334 posts

48 months

Thursday 28th May 2020
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tokyotv said:
It would be interesting to see what the world would Look like without the addiction to credit.

A lot fewer cars clogging the roads up....and a less people wasting their life looking at smart phones.

If you can’t afford it.....you should not buy it....
I agree. I suspect we'd all be a lot happier (apart from the would-be gazillionaires that wouldn't be able to cream off nearly as much), and lots of people would be forced to get more worthwhile careers. Society is broken and people think a new [insert product here] will make up for it. It won't...

South tdf

1,518 posts

194 months

Thursday 28th May 2020
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Where are all the cheap cars then?

I am Looking out for a couple of cars that suit my requirements and if anything the cars currently on the market are selling and new stock is not appearing yet.


stevensdrs

3,208 posts

199 months

Thursday 28th May 2020
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South tdf said:
Where are all the cheap cars then?

I am Looking out for a couple of cars that suit my requirements and if anything the cars currently on the market are selling and new stock is not appearing yet.
The st hasn't hit the fan yet. When the redundancies kick in and unemployment goes through the roof prices will fall.

Butter Face

30,191 posts

159 months

Friday 29th May 2020
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growlerowl said:
tokyotv said:
It would be interesting to see what the world would Look like without the addiction to credit.

A lot fewer cars clogging the roads up....and a less people wasting their life looking at smart phones.

If you can’t afford it.....you should not buy it....
I agree. I suspect we'd all be a lot happier (apart from the would-be gazillionaires that wouldn't be able to cream off nearly as much), and lots of people would be forced to get more worthwhile careers. Society is broken and people think a new [insert product here] will make up for it. It won't...
The irony of you quoting a replying to a poster with that statement who supplies and fits high end (and likely very expensive) tv, audio and home cinema installs and very likely have flash motors, the latest iPhones and gadgets and all the [insert latest product here] is delicious. rofl

nickfrog

20,871 posts

216 months

Friday 29th May 2020
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growlerowl said:
Society is broken and people think a new [insert product here] will make up for it. It won't...
So you never buy anything new presumably.
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