Will Coronavirus hit used car prices? (Vol 2)
Discussion
Anonymous-poster said:
In reality 2.9% is where finance should be when the BoE base rate is so low.
Agreed, 2.9% is still high % relative to base rate, but I'd say it's fair on a PCP as it gives you the GFV/option to walk away at the end of the term vs a normal loan from other providers.Thing is at any given point in time the emotional biases of market participants is so blinding noone really sees 'objectively' and everyone gets tied up in the 'motivations' and 'why'... Last summer one could argue that BMWFS 'thought it's all going kaput' which is 'why' they offered relatively 'cheap' finance on AUC. You could also argue that BMWFS were super smart and knew used car price inflation was coming and this 'lower risk' is 'why' they offered the lower rate APR last year.
Both are 'arguments' and you never really get to the bottom of 'why' or a consensus until long after the fact - all you can take from it is, APRs have dropped for a 2-3mth period - make your choice if want you want is at a price/deal you're willing to bite at and put your money where your mouth is for whatever your reasons you have for wanting/needing to buy that car.
Fast forward to 2021, all this 'why' are used car prices so high, when will they fall, will they continue to rise is all a distraction again. If the car you want is at a price/deal you're willing to bite at (given your new found COVID savings due to not spending on holidays, you invested your furlough cash in crypto whatever etc etc) put your money where your mouth is and accept the consequences.
Likewise if you're sat on a car that's going up and not getting much use/coming up for insurance/tax/service costs and you can trade down/go without a car/reinvest the windfall from selling your car - great - again put your money where your mouth is, take a risk (or maybe you are derisking depending on your own circumstances/perspective) and bite the bullet one way or the other...
The market (not just cars) is bigger than any one of us and the market can stay irrational for longer than you can stay solvent.
Fezzaman said:
Anonymous-poster said:
In reality 2.9% is where finance should be when the BoE base rate is so low.
Agreed, 2.9% is still high % relative to base rate, but I'd say it's fair on a PCP as it gives you the GFV/option to walk away at the end of the term vs a normal loan from other providers.Thing is at any given point in time the emotional biases of market participants is so blinding noone really sees 'objectively' and everyone gets tied up in the 'motivations' and 'why'... Last summer one could argue that BMWFS 'thought it's all going kaput' which is 'why' they offered relatively 'cheap' finance on AUC. You could also argue that BMWFS were super smart and knew used car price inflation was coming and this 'lower risk' is 'why' they offered the lower rate APR last year.
Both are 'arguments' and you never really get to the bottom of 'why' or a consensus until long after the fact - all you can take from it is, APRs have dropped for a 2-3mth period - make your choice if want you want is at a price/deal you're willing to bite at and put your money where your mouth is for whatever your reasons you have for wanting/needing to buy that car.
Fast forward to 2021, all this 'why' are used car prices so high, when will they fall, will they continue to rise is all a distraction again. If the car you want is at a price/deal you're willing to bite at (given your new found COVID savings due to not spending on holidays, you invested your furlough cash in crypto whatever etc etc) put your money where your mouth is and accept the consequences.
Likewise if you're sat on a car that's going up and not getting much use/coming up for insurance/tax/service costs and you can trade down/go without a car/reinvest the windfall from selling your car - great - again put your money where your mouth is, take a risk (or maybe you are derisking depending on your own circumstances/perspective) and bite the bullet one way or the other...
The market (not just cars) is bigger than any one of us and the market can stay irrational for longer than you can stay solvent.
Silly question, but are there any cars which aren’t gaining value and are actually depreciating besides all the stuff which is either going to be a moneypit or just be awful to drive?
Otherwise inflated car prices at present make not much difference to anyone in reality.
(E.g. last year my p/x value was around 10.5k, Golf GTi mk7.5 started at about 17k approved
Current p/x value 13k, GTi mk7.5 around 20k approved).
Cost to change has gone up by about £500 which isn’t much considering my mileage has increased by about 16,000 in that period of time.
Otherwise inflated car prices at present make not much difference to anyone in reality.
(E.g. last year my p/x value was around 10.5k, Golf GTi mk7.5 started at about 17k approved
Current p/x value 13k, GTi mk7.5 around 20k approved).
Cost to change has gone up by about £500 which isn’t much considering my mileage has increased by about 16,000 in that period of time.
Deep Thought said:
Nothing to do with dealers. The finance company sets the residual.
Clearly right now they are working on the basis that prices may have dropped in 3 years time.
And as new cars are selling so well, why would they take any risk?
New cars are in no way ‘selling so well’. Latest SMMT figures show sales havent been this low since 2011 (excluding 2020). The problem now is new prices have increased to such a level that PCP deals are £500pm for a bog standard car. Until this evens out, car sales will stay suppressed as its purely not affordable and an effect from hidden inflation. That is, unless the higher prices are driving more profit on a reduced volume, but working in a similar industry its always much more efficient to have higher volumes on lower unit profit than the other way round.Clearly right now they are working on the basis that prices may have dropped in 3 years time.
And as new cars are selling so well, why would they take any risk?
The Rotrex Kid said:
Sure they are. Sure.
ToastMan76 said:
The Rotrex Kid said:
Sure they are. Sure.
Very, very few people go into finance agreements with £0 deposit. £1000 deposit would make that Golf circa £30pm cheaper straight away.
Your statement that a ‘bog standard car’ is £500pm is hyperbole at best.
You can have a Dacia Sandero with £861 deposit for £114pm and add servicing for £9.99 per month.
Some people will be happy and comfortable to pay £400pm for a golf, others won’t and will buy a Dacia.
The Rotrex Kid said:
I assume you quoted all of those with £0 deposit yeah?
Very, very few people go into finance agreements with £0 deposit. £1000 deposit would make that Golf circa £30pm cheaper straight away.
Your statement that a ‘bog standard car’ is £500pm is hyperbole at best.
You can have a Dacia Sandero with £861 deposit for £114pm and add servicing for £9.99 per month.
Some people will be happy and comfortable to pay £400pm for a golf, others won’t and will buy a Dacia.
£1000 is more like £20 per month, so it isnt a huge inpact to the figures either way (VW were all £275 deposit due to the way their calc works so even less). 2 years ago you could get decent PCP deals, at around £300-320. 1-2 years before that you could get decent cars at £200-300. Now for base spec cars to be £400 is ridiculous. The simple fact is car prices have increased by 10-20% (example an MX5 was around £18k RRP in 2019 now its £24k). GMFVs have remained the same during this time, so all the increase has gone on either deposit or monthlies. The sales reflect this, with declining sales in the car market long before 2020, especially among private buyers.Very, very few people go into finance agreements with £0 deposit. £1000 deposit would make that Golf circa £30pm cheaper straight away.
Your statement that a ‘bog standard car’ is £500pm is hyperbole at best.
You can have a Dacia Sandero with £861 deposit for £114pm and add servicing for £9.99 per month.
Some people will be happy and comfortable to pay £400pm for a golf, others won’t and will buy a Dacia.
ToastMan76 said:
New cars are in no way ‘selling so well’. Latest SMMT figures show sales havent been this low since 2011 (excluding 2020). The problem now is new prices have increased to such a level that PCP deals are £500pm for a bog standard car. Until this evens out, car sales will stay suppressed as its purely not affordable and an effect from hidden inflation. That is, unless the higher prices are driving more profit on a reduced volume, but working in a similar industry its always much more efficient to have higher volumes on lower unit profit than the other way round.
New cars are not selling well as there are hardly any to sell. Everything is pretty much factory order and lead times are being stretched. PCP prices seem higher as the manufacturers don’t need to incentivise buyers with deposit contributions and discounts.I heard a rumour that a Vauxhall dealer sold a new car for list price last week, crazy if true!
GolfDragon said:
Silly question, but are there any cars which aren’t gaining value and are actually depreciating besides all the stuff which is either going to be a moneypit or just be awful to drive?
Otherwise inflated car prices at present make not much difference to anyone in reality.
(E.g. last year my p/x value was around 10.5k, Golf GTi mk7.5 started at about 17k approved
Current p/x value 13k, GTi mk7.5 around 20k approved).
Cost to change has gone up by about £500 which isn’t much considering my mileage has increased by about 16,000 in that period of time.
Believe it or not the cheap end of the market is suffering as the traditional low end traders really can’t be bothered with people buying £1000 cars and moaning when something stops working after six weeks. There are lots of cheap cars around but nobody really wants them.Otherwise inflated car prices at present make not much difference to anyone in reality.
(E.g. last year my p/x value was around 10.5k, Golf GTi mk7.5 started at about 17k approved
Current p/x value 13k, GTi mk7.5 around 20k approved).
Cost to change has gone up by about £500 which isn’t much considering my mileage has increased by about 16,000 in that period of time.
ToastMan76 said:
The Rotrex Kid said:
I assume you quoted all of those with £0 deposit yeah?
Very, very few people go into finance agreements with £0 deposit. £1000 deposit would make that Golf circa £30pm cheaper straight away.
Your statement that a ‘bog standard car’ is £500pm is hyperbole at best.
You can have a Dacia Sandero with £861 deposit for £114pm and add servicing for £9.99 per month.
Some people will be happy and comfortable to pay £400pm for a golf, others won’t and will buy a Dacia.
£1000 is more like £20 per month, so it isnt a huge inpact to the figures either way (VW were all £275 deposit due to the way their calc works so even less). 2 years ago you could get decent PCP deals, at around £300-320. 1-2 years before that you could get decent cars at £200-300. Now for base spec cars to be £400 is ridiculous. The simple fact is car prices have increased by 10-20% (example an MX5 was around £18k RRP in 2019 now its £24k). GMFVs have remained the same during this time, so all the increase has gone on either deposit or monthlies. The sales reflect this, with declining sales in the car market long before 2020, especially among private buyers.Very, very few people go into finance agreements with £0 deposit. £1000 deposit would make that Golf circa £30pm cheaper straight away.
Your statement that a ‘bog standard car’ is £500pm is hyperbole at best.
You can have a Dacia Sandero with £861 deposit for £114pm and add servicing for £9.99 per month.
Some people will be happy and comfortable to pay £400pm for a golf, others won’t and will buy a Dacia.
The rest of your figures are anecdotal, most cars have not gone up 10-20% in 2 years, GMFV’s are normally a fixed % of the list price so if a car goes up, the GMFV goes up with it. It is interesting just how much the MX5 has gone up though, but it’s hardly indicate of the wider market.
The new car market (private registrations) was down 3.2% in 2019 which was the lowest since 2013 so the market was hardly declining in the way you state IMO.
Auto810graphy said:
Believe it or not the cheap end of the market is suffering as the traditional low end traders really can’t be bothered with people buying £1000 cars and moaning when something stops working after six weeks. There are lots of cheap cars around but nobody really wants them.
So what happens to them?it used to be that you could go to an auction to pick up a car as a private buyer but public friendly auctions have pretty much disappeared and you could go to a trade auction but there fees are so high if you are not a trader on low value cars it is not really worth it.
ToastMan76 said:
New cars are in no way ‘selling so well’. Latest SMMT figures show sales havent been this low since 2011 (excluding 2020). The problem now is new prices have increased to such a level that PCP deals are £500pm for a bog standard car. Until this evens out, car sales will stay suppressed as its purely not affordable and an effect from hidden inflation. That is, unless the higher prices are driving more profit on a reduced volume, but working in a similar industry its always much more efficient to have higher volumes on lower unit profit than the other way round.
My wording was perhaps wrong. They are selling so well relative to available stock. Why further incentivise what you know you will sell anyway?
e-honda said:
So what happens to them?
it used to be that you could go to an auction to pick up a car as a private buyer but public friendly auctions have pretty much disappeared and you could go to a trade auction but there fees are so high if you are not a trader on low value cars it is not really worth it.
Luckily we don’t see many cheap cars but the last couple we took in PX went onto a trade to trade auction and got no bids despite starting at £250 so ended up being sold on Removemycar and scrapped. Both were perfectly usable, one a 14 year old sub 100k Clio Campus with new MOT and the other a 2008 Zafira, again useable for £300.it used to be that you could go to an auction to pick up a car as a private buyer but public friendly auctions have pretty much disappeared and you could go to a trade auction but there fees are so high if you are not a trader on low value cars it is not really worth it.
Auto810graphy said:
Luckily we don’t see many cheap cars but the last couple we took in PX went onto a trade to trade auction and got no bids despite starting at £250 so ended up being sold on Removemycar and scrapped. Both were perfectly usable, one a 14 year old sub 100k Clio Campus with new MOT and the other a 2008 Zafira, again useable for £300.
I guess i am wondering where they end up after thatAre we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
e-honda said:
I guess i am wondering where they end up after that
Are we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
I think that’s pretty much it. Are we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
Can you image the grief you’d get being a bottom end dealer selling £1,000 cars with £200 profit per unit?
Having the new owner turn up 3 months later with a wear and tear issue ‘because they know their rights’??
f
k that. I can see why the trade would rather they were crushed. Which is a shame. e-honda said:
Auto810graphy said:
Luckily we don’t see many cheap cars but the last couple we took in PX went onto a trade to trade auction and got no bids despite starting at £250 so ended up being sold on Removemycar and scrapped. Both were perfectly usable, one a 14 year old sub 100k Clio Campus with new MOT and the other a 2008 Zafira, again useable for £300.
I guess i am wondering where they end up after thatAre we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
I know of a friend of a friend (both motor traders) who has a standing agreement with the local auction house to buy up all the cheapest, no reserve cars which he then simply strips them of their catalytic converters, alloys, batteries etc then scraps the remains. He has been saying some catalytic converters are making £700. Apparently the cars are like those described above - old Corsas, Zafiras, Clios etc. All very drivable but simply worth more as scrap than they are to retail.
My friend did buy a couple off him - however its interesting to note that they'd have been stripped and scrapped by now and turned back in to cash and profit whereas the two cars are sitting in my friends yard, with noone particularly interested in buying them.
So its not about consumer rights laws, its just about their high scrap value compared to their retail value.
The spinner of plates said:
e-honda said:
I guess i am wondering where they end up after that
Are we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
I think that’s pretty much it. Are we now a country that has such strong consumer rights laws we have to crush working usable cars that aren't quite retail grade because there is no way to sell them without being liable for them?
Can you image the grief you’d get being a bottom end dealer selling £1,000 cars with £200 profit per unit?
Having the new owner turn up 3 months later with a wear and tear issue ‘because they know their rights’??
f
k that. I can see why the trade would rather they were crushed. Which is a shame. There is a trader market for the wee cheapies and they are usually bought by driveway traders masquerading as private sellers and taking a hundred or a couple of hundred of profit in to their back pockets and staying beneath the radar.
And this isnt a new phenomenon in trading - theres a whole industry of "we buy scrap gold" whereby some ancient old worn out gold ring is worth more as scrap gold than it would be to try to retail it.
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