Will Coronavirus hit used car prices? (Vol 2)
Discussion
911hope said:
jsf said:
Financing costs to whome?
It depends on the business model of the seller.
You can't answer the question with something that applies to every business, because they all serve different markets with different models of getting market share.
This applies at any time.
Can't extract an answer from this.It depends on the business model of the seller.
You can't answer the question with something that applies to every business, because they all serve different markets with different models of getting market share.
This applies at any time.
Finance costs go up with interest rates, surely.
If not, please explain.
Pommy said:
It's clear that financing costs are going to rise. That's a fact. There is no cheap money in the system.
They rise > rates rise > rates rise > cost of purchase goes up > cost to purchase goes up demand goes down > demand goes down > demand goes down used car prices go down.
Add in cost of living pressures...
Exactly, They rise > rates rise > rates rise > cost of purchase goes up > cost to purchase goes up demand goes down > demand goes down > demand goes down used car prices go down.
Add in cost of living pressures...
All the salesmen (who will deny they are salesmen) on this thread:
911hope said:
What proportion of the population do you think would be classed as "the poor"
As a guide, 12% of English households are estimated to be at fuel poverty status. 25% for Scotland.
Source : house of commons library document.
Some projections for this to increase by 50%, so expect 18% by the end of the year in England.
So lots of people will be spending much higher proportion of their income on fuel and reduced amount on other things. Some of those impact the jobs of "middle class" folks and so on. ..a downward spiral.
A recession is pretty much a given used car volumes and prices are already falling. New car registrations will suffer as it always does in a recession. Only an idiot enters a PCP deal, when they are worried about their job!
The high end sector in auto is not representative of the vast majority of the market, so just ignore the counter intuitive behaviour there..it will follow at some point.
So Audi finance is APR of 4.9% at the moment. As a guide, 12% of English households are estimated to be at fuel poverty status. 25% for Scotland.
Source : house of commons library document.
Some projections for this to increase by 50%, so expect 18% by the end of the year in England.
So lots of people will be spending much higher proportion of their income on fuel and reduced amount on other things. Some of those impact the jobs of "middle class" folks and so on. ..a downward spiral.
A recession is pretty much a given used car volumes and prices are already falling. New car registrations will suffer as it always does in a recession. Only an idiot enters a PCP deal, when they are worried about their job!
The high end sector in auto is not representative of the vast majority of the market, so just ignore the counter intuitive behaviour there..it will follow at some point.
How what do you estimate the rate to be when base rates are 3%?
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Agreed.
I take your point RE: it being a bad idea to pay overs on something like that.
A friend of my sons sells BMWs and we were talking a little while ago about the price of some of the BMW high end stuff. He commented it was quite usual for people to come in and spend 6 figure sums on BMWs now. Not every day, but it did happen regularly. Things like top end X5, X7. Stuff i'd normally associate with heart stopping depreciation.
He said generally they were bought through these peoples companies or "the monthlies" paid for through the companies and they werent normally concerned or bothered by the depreciation. Maybe they were rich enough not to care or could write a lot of the depreciation off to tax.
I have never understood the Company pays the monthlies so not bothered, what about the BIK that has to be paid on top?I take your point RE: it being a bad idea to pay overs on something like that.
A friend of my sons sells BMWs and we were talking a little while ago about the price of some of the BMW high end stuff. He commented it was quite usual for people to come in and spend 6 figure sums on BMWs now. Not every day, but it did happen regularly. Things like top end X5, X7. Stuff i'd normally associate with heart stopping depreciation.
He said generally they were bought through these peoples companies or "the monthlies" paid for through the companies and they werent normally concerned or bothered by the depreciation. Maybe they were rich enough not to care or could write a lot of the depreciation off to tax.
Edited by Deep Thought on Sunday 14th August 12:45
There could be various reasons why it would be preferential on a tax cost basis for someone to have the company pay for a car, or have a monthly lease payment come out of the company account.
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Agreed.
I take your point RE: it being a bad idea to pay overs on something like that.
A friend of my sons sells BMWs and we were talking a little while ago about the price of some of the BMW high end stuff. He commented it was quite usual for people to come in and spend 6 figure sums on BMWs now. Not every day, but it did happen regularly. Things like top end X5, X7. Stuff i'd normally associate with heart stopping depreciation.
He said generally they were bought through these peoples companies or "the monthlies" paid for through the companies and they werent normally concerned or bothered by the depreciation. Maybe they were rich enough not to care or could write a lot of the depreciation off to tax.
I have never understood the Company pays the monthlies so not bothered, what about the BIK that has to be paid on top?I take your point RE: it being a bad idea to pay overs on something like that.
A friend of my sons sells BMWs and we were talking a little while ago about the price of some of the BMW high end stuff. He commented it was quite usual for people to come in and spend 6 figure sums on BMWs now. Not every day, but it did happen regularly. Things like top end X5, X7. Stuff i'd normally associate with heart stopping depreciation.
He said generally they were bought through these peoples companies or "the monthlies" paid for through the companies and they werent normally concerned or bothered by the depreciation. Maybe they were rich enough not to care or could write a lot of the depreciation off to tax.
Edited by Deep Thought on Sunday 14th August 12:45
There could be various reasons why it would be preferential on a tax cost basis for someone to have the company pay for a car, or have a monthly lease payment come out of the company account.
911hope said:
911hope said:
What proportion of the population do you think would be classed as "the poor"
As a guide, 12% of English households are estimated to be at fuel poverty status. 25% for Scotland.
Source : house of commons library document.
Some projections for this to increase by 50%, so expect 18% by the end of the year in England.
So lots of people will be spending much higher proportion of their income on fuel and reduced amount on other things. Some of those impact the jobs of "middle class" folks and so on. ..a downward spiral.
A recession is pretty much a given used car volumes and prices are already falling. New car registrations will suffer as it always does in a recession. Only an idiot enters a PCP deal, when they are worried about their job!
The high end sector in auto is not representative of the vast majority of the market, so just ignore the counter intuitive behaviour there..it will follow at some point.
So Audi finance is APR of 4.9% at the moment. As a guide, 12% of English households are estimated to be at fuel poverty status. 25% for Scotland.
Source : house of commons library document.
Some projections for this to increase by 50%, so expect 18% by the end of the year in England.
So lots of people will be spending much higher proportion of their income on fuel and reduced amount on other things. Some of those impact the jobs of "middle class" folks and so on. ..a downward spiral.
A recession is pretty much a given used car volumes and prices are already falling. New car registrations will suffer as it always does in a recession. Only an idiot enters a PCP deal, when they are worried about their job!
The high end sector in auto is not representative of the vast majority of the market, so just ignore the counter intuitive behaviour there..it will follow at some point.
How what do you estimate the rate to be when base rates are 3%?
Fusion777 said:
jsf said:
There is zero evidence the fundermentals of the market are changing in the foreseeable.
Wow. Definitely no major economic dislocations and household income pressures imminent, then?Trying to extract the thinking of those that think rising interest rates won't impact the customer and the car market.
Here is what I have extracted:
1. Rising interest rates don't mean rising consumer monthly finance costs , so the selling market won't be impacted. (needs explaining - read on)
2. The finance costs to the consumer will not rise, because the manufacturers' finance arms will offer great deals to keep people buying.
3. The manufacturers' finance arms will do this because the buyers aren't otherwise buying. AKA the sellers market is bad.
3 opposes 1, so the reasoning fails.
In the mean time, the finance arm is losing money. Or the manufacturing arm is subsidising the finance arm, so the profit sits there.
In any case, it is bad for the producer or the finance house.
Here is what I have extracted:
1. Rising interest rates don't mean rising consumer monthly finance costs , so the selling market won't be impacted. (needs explaining - read on)
2. The finance costs to the consumer will not rise, because the manufacturers' finance arms will offer great deals to keep people buying.
3. The manufacturers' finance arms will do this because the buyers aren't otherwise buying. AKA the sellers market is bad.
3 opposes 1, so the reasoning fails.
In the mean time, the finance arm is losing money. Or the manufacturing arm is subsidising the finance arm, so the profit sits there.
In any case, it is bad for the producer or the finance house.
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
Deep Thought said:
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
The point being that we've strayed from - theres are people willing to drop £100K+ on high depreciating cars, irrespective of funding source.
Edited by Deep Thought on Sunday 14th August 16:40
jsf said:
Fusion777 said:
Wow. Definitely no major economic dislocations and household income pressures imminent, then?
The impact varies considerably. Just as was the case when covid hit and prices collapsed..........errThe used car market does not always respond how you might expect - COVID was a great example of that. People thought the market would crash, yet the reverse was true.
The other example i have cited before is when we had dieselgate and the press started spooking people about the future of diesel cars. New car buyers started avoiding diesels in their droves and new diesel car sales dropped dramatically. BUT, used car buyers didnt and the value of good, used diesel cars went UP, because of less supply of diesel cars on to the used market.
Edited by Deep Thought on Sunday 14th August 16:40
Edited by Deep Thought on Sunday 14th August 16:41
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
The point being that we've strayed from - theres are people willing to drop £100K+ on high depreciating cars, irrespective of funding source.
Edited by Deep Thought on Sunday 14th August 16:40
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
The point being that we've strayed from - theres are people willing to drop £100K+ on high depreciating cars, irrespective of funding source.
Edited by Deep Thought on Sunday 14th August 16:40
I cant see how spending £100K on a high depreciating car is financially sound, but some people do it. I'm sure they have their reasons and ways to justify it.
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
Deep Thought said:
Tomanybikes said:
I’am not an accountant but paying for a £100k car throughly your own LtD co then paying BIK on it seems very expensive but I bow to your greater knowledge in this case.
Taking £100K out of a limited co if you've already taken out your £38K in dividends would incur 33% tax on it anyway.The cost of the car could be depreciated and offset against tax.
It is being done by people so we will both have to bow to their accountants knowledge as to the tax benefits.
The point being that we've strayed from - theres are people willing to drop £100K+ on high depreciating cars, irrespective of funding source.
Edited by Deep Thought on Sunday 14th August 16:40
I can see how spending £100K on a high depreciating car is financially sound, but some people do it. I'm sure they have their reasons and ways to justifiy it.
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