Negative equity - is this normal?
Discussion
nunpuncher said:
Welshbeef said:
panholio said:
Classic pistonheads. Everyone likes to jump on someone who has a PCP. Newsflash shed enthusiasts, literally millions of people pay this much for cars.
I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
Mean salary is £27k and average house price is £280k ish. I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
I dare say no millions do not do this.
933,000 cars bought on finance in 2019 - not quite a million but not far off..
Seems having everything on tick these days is the norm. Someone told me there's even some company specifically set up to allow folk to buy designer clothes on tick now.
Jamescrs said:
nickfrog said:
Would they?
I imagine so. 
t, at least I hope so. But then again I have probably never been to the estate you mentioned to interview the residents 
nickfrog said:
I think it's a myth - you would have to be a seriously sad weirdo to "frown upon" a non-"premium" badge. Hopefully that's a tiny minority of people. I can't say I have met many like that. One can like a particular car or brand without looking down at others who don't give a st, at least I hope so. But then again I have probably never been to the estate you mentioned to interview the residents
Was told this morning by my missus' neighbour that she was using her parking spot so that her BMW X5 (2009 plate) wouldn't get damaged out on the road and so therefore I should find another space for my Mini R53 - "It's not like it matters if that thing got hit, it's not an expensive car"t, at least I hope so. But then again I have probably never been to the estate you mentioned to interview the residents Jamescrs said:
maz8062 said:
So how have we got to a stage where secondhand car values are way out of the affordability of Mr average on HP? Because car inflation has outpaced wage inflation. But the car manufacturers have been clever by mirroring the US in introducing lease payments, and in so doing, making cars accessible for the regular monthly payments of old (on HP) but now one doesn’t own the car.
.
I do sit here finding myself wondering if we have actually got to a stage where second hand cars are out of the affordability of Mr average on HP or have we got to a point in society where Mr Average now expects to drive what would have once been seen as an executive car which would have been out of reach of that person?.
To try and illustrate my point, I was born in 1981 and growing up my dad had a fairly decent job as the senior accountant at a medium size firm which sold bathrooms kitchens etc wholesale to B&Q amongst others, so I would suggest thats a fairly reasonable employment, I have no idea what his ake home salary was but we were comfortable, My Mum worked in retail, so a two income family, very average of the time.
Growing up through the 80's and 90's my parents drove typically normal cars from Ford, Citroen, Peugeot, Renault, Fiat probably a couple of other brands I can't recall currently, typically my dad owned a Mondeo sized estate car and my Mum would have a Fiesta size hatchback.
We lived in a detached 3 bed house which was a new build in 1983 when my parents bought it and a decade later they extended to make it 4 bedrooms. On our estate of I think just under 40 houses next to no one owned any type of premium German car, I recall one household having a C class Merc and another having what was at the time an old Jaguar.
If you look at people living in similar circumstances on a modern new build estate now I imagine most driveways will be occupied by a BMW, Audi or Mercedes and "lesser" badges would frowned upon.
I don't think affordability has changed but peoples wants have changed and what once would have been out of reach for most people has now become the norm
And relative to our respective parents driving Fords, or Austin Rovers, or whatever, compared to "premium" brands now, thats an awful lot more to do with how much the so called "premium" brand manufacturers have pushed their products in the marketplace and made them affordable. Its also worth nothing that for all the talk of "everybody PCPing new Mercs, BMWs and Audis", the top three sellers are still Fiesta, Corsa, Golf, followed by Focus. Of the big three German "premium" brands, only Mercedes makes the Top 10 with the heavily incentivised A Class.
https://www.driving.co.uk/news/business/uks-top-10...
And yes affordability has changed. When i grew up, there was usually a primary earner and chances were the mother stayed at home or worked part time. It was also likely her job was a lesser job than the primary earner. Thats just how it was.
Now its likely a two income household and just as likely that the wifes job earns as much as the husbands, or greater. So there could be two quite reasonable incomes there.
Wiltshire Lad said:
nunpuncher said:
Welshbeef said:
panholio said:
Classic pistonheads. Everyone likes to jump on someone who has a PCP. Newsflash shed enthusiasts, literally millions of people pay this much for cars.
I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
Mean salary is £27k and average house price is £280k ish. I’d also point out that the low deposit is not necessarily a factor as many have referenced. You can stick £10k into a PCP and still be in negative equity for most of it. The payments are just less. That’s how it works and what the finance company want.
Your position OP is as per usual. PCP’s are not good to get out of early. Especially with a 3 month holiday.
I dare say no millions do not do this.
933,000 cars bought on finance in 2019 - not quite a million but not far off..
Seems having everything on tick these days is the norm. Someone told me there's even some company specifically set up to allow folk to buy designer clothes on tick now.
Wills2 said:
The price of new car is the price the consumer pays currently that includes 20% VAT and is baked into the value of the car, the utter drivel posted by people who state that the VAT is lost as soon as you drive off the forecourt is just that drivel.
Today I sold my X3M for £52,000 it was purchased new at £59,000 15 months ago the ex vat price at invoice was £49,166 so after 15 months and 9000 miles it is still worth more than the new ex vat invoice 15 months ago, same situation with an M3 I bought in 2012 45k invoice inc VAT sold for 38k 18 months later, look at GT3/4s for examples of cars that actually increase in value as you drive off the forecourt....VAT has nothing to do with it.
Yep, a common misconception that is often repeated on PH. Assume it just the conincdence that (very) roughly a new car loses 20% of its value once it second hand, whcih coincidentally is a simialr % as VAT.Today I sold my X3M for £52,000 it was purchased new at £59,000 15 months ago the ex vat price at invoice was £49,166 so after 15 months and 9000 miles it is still worth more than the new ex vat invoice 15 months ago, same situation with an M3 I bought in 2012 45k invoice inc VAT sold for 38k 18 months later, look at GT3/4s for examples of cars that actually increase in value as you drive off the forecourt....VAT has nothing to do with it.
Car loses 20% because of market perception it has been used by someone else (and you don't know how well) and was ordered to their spec not yours
maz8062 said:
So how have we got to a stage where secondhand car values are way out of the affordability of Mr average on HP? Because car inflation has outpaced wage inflation.
genuine question - is this true or have people's expectations of the brand/quality/prestige of car they own massively increased from the 80/90s you reference, when most drove around in fairly ordinary Rovers/Fords/Vauxhalls?ah sorry, I see above Jamescrs made a very similar point
Edited by Adam. on Friday 5th March 16:06
pb8g09 said:
nickfrog said:
I think it's a myth - you would have to be a seriously sad weirdo to "frown upon" a non-"premium" badge. Hopefully that's a tiny minority of people. I can't say I have met many like that. One can like a particular car or brand without looking down at others who don't give a st, at least I hope so. But then again I have probably never been to the estate you mentioned to interview the residents
Was told this morning by my missus' neighbour that she was using her parking spot so that her BMW X5 (2009 plate) wouldn't get damaged out on the road and so therefore I should find another space for my Mini R53 - "It's not like it matters if that thing got hit, it's not an expensive car"t, at least I hope so. But then again I have probably never been to the estate you mentioned to interview the residents Tell her to do one.
Adam. said:
genuine question - is this true or have people's expectations of the brand/quality/prestige of car they own massively increased from the 80/90s you reference, when most drove around in fairly ordinary Rovers/Fords/Vauxhalls?
ah sorry, I see above Jamescrs made a very similar point
It's not unlike the minimum wage workers you see wearing Canada Goose jackets or the lifelong unemployment benefits recipients who always manage to have the latest iPhone - People think they 'deserve' the best of everything, so money gets prioritised by different people in different ways.ah sorry, I see above Jamescrs made a very similar point
Edited by Adam. on Friday 5th March 16:06
I don't care how people spend their money, it doesn't impact me and I can't understand people who get bent out of shape about what other people do. Besides, if 'renting' a car via PCP for a few years was the approach that 99% of the market took, the supply would outstrip demand for used cars and the remaining 1% would get some absolute bargains.
I'm all in favour of people PCP'ing and never owning a vehicle, unfortunatley I do think there needs to be much more education during the sales process about negative equity, departing a PCP early, what is deemed 'reasonable condition' for handing back at the end etc.
Adam. said:
maz8062 said:
So how have we got to a stage where secondhand car values are way out of the affordability of Mr average on HP? Because car inflation has outpaced wage inflation.
genuine question - is this true or have people's expectations of the brand/quality/prestige of car they own massively increased from the 80/90s you reference, when most drove around in fairly ordinary Rovers/Fords/Vauxhalls?ah sorry, I see above Jamescrs made a very similar point
Edited by Adam. on Friday 5th March 16:06
I remember a friend of mine coming in to buy a new Metro ARX back in 1988. He ended up paying £129 a month for it. That works out at £328 in todays money.
https://www.bankofengland.co.uk/monetary-policy/in...
£329 a month today on a PCP or lease will get you something a bit more upmarket than a Metro (equivalent)
Deep Thought said:
I take it if you had went to have a look in your 2017 A6 or 2020 SEAT Arona people would instantly be able to tell from behind their curtains that it wasnt rental spec and had in fact been bought with - presumably - cash?
You may have misunderstood me (somehow managed to post my comment in the middle of someone else's - mine was just the numbers) I've nothing against PCPs - had an Alfa Mito on one a few years back. Just made the point that an awful lot of cars are purchased that way. Don't really care how anyone purchased / leased / or whatever their wheels. I'm certainly not in the 'how dare these common folks drive a nice car that they haven't purchased outright' camp...J1990 said:
I'm all in favour of people PCP'ing and never owning a vehicle, unfortunatley I do think there needs to be much more education during the sales process about negative equity, departing a PCP early, what is deemed 'reasonable condition' for handing back at the end etc.
The onus is on the consumer not the dealer surely? Regardless of whether you are paying £30k straight out of your current account or taking on £30k of finance, you are still committing to the same spend and that kind of decision should surely be a considered, educated decision.Wiltshire Lad said:
Deep Thought said:
I take it if you had went to have a look in your 2017 A6 or 2020 SEAT Arona people would instantly be able to tell from behind their curtains that it wasnt rental spec and had in fact been bought with - presumably - cash?
You may have misunderstood me (somehow managed to post my comment in the middle of someone else's - mine was just the numbers) I've nothing against PCPs - had an Alfa Mito on one a few years back. Just made the point that an awful lot of cars are purchased that way. Don't really care how anyone purchased / leased / or whatever their wheels. I'm certainly not in the 'how dare these common folks drive a nice car that they haven't purchased outright' camp...
Deep Thought said:
And yes affordability has changed. When i grew up, there was usually a primary earner and chances were the mother stayed at home or worked part time. It was also likely her job was a lesser job than the primary earner. Thats just how it was.
Now its likely a two income household and just as likely that the wifes job earns as much as the husbands, or greater. So there could be two quite reasonable incomes there.
Do you have any statistics about that?Now its likely a two income household and just as likely that the wifes job earns as much as the husbands, or greater. So there could be two quite reasonable incomes there.
I obviously don’t know the details but based on conversations over the years most couples have one person with a much higher salary than the other.
I only know of one couple that probably have similar salaries and that’s because they’re lucky to be IT contractors with one “employer” for many years.
resolve10 said:
J1990 said:
I'm all in favour of people PCP'ing and never owning a vehicle, unfortunatley I do think there needs to be much more education during the sales process about negative equity, departing a PCP early, what is deemed 'reasonable condition' for handing back at the end etc.
The onus is on the consumer not the dealer surely? Regardless of whether you are paying £30k straight out of your current account or taking on £30k of finance, you are still committing to the same spend and that kind of decision should surely be a considered, educated decision.Cars are the same - if you can convince people that owning the car is not what it’s all about and that’s it is more important to make the payments affordable, the money men are interfering with a free market. The cars should be cheaper, but they’re not, which is creating a bubble - a PCP bubble, that will inevitably burst at some stage and we’ll go back to good old fashioned free market economics.
That said, the op is free to do what he thinks is best for his family. If his wife wants a nice car and it helps to keep harmony at home, go for it. None of us are perfect - I spend fortunes on school fees when my kids could go to free ones, so there’s an expense that dwarfs the OP’s by some margin.
maz8062 said:
The cars should be cheaper, but they’re not, which is creating a bubble - a PCP bubble, that will inevitably burst at some stage and we’ll go back to good old fashioned free market economics.
How much cheaper should cars be in your view considering that we have the cheapest car price in Europe? I am talking about transaction prices here of course, not lists.To achieve your utopic free market economics, would you also remove all FCA protection?
nickfrog said:
maz8062 said:
The cars should be cheaper, but they’re not, which is creating a bubble - a PCP bubble, that will inevitably burst at some stage and we’ll go back to good old fashioned free market economics.
How much cheaper should cars be in your view considering that we have the cheapest car price in Europe? I am talking about transaction prices here of course, not lists.To achieve your utopic free market economics, would you also remove all FCA protection?
New? Pre Tax? Post Tax?
Used?
Selection of specific vehicles? Average of all sales?
RUSTILLDOWN said:
Do you have any statistics about that?
I obviously don’t know the details but based on conversations over the years most couples have one person with a much higher salary than the other.
I only know of one couple that probably have similar salaries and that’s because they’re lucky to be IT contractors with one “employer” for many years.
Is it not common knowledge that these days both parties in a couple are likely to be out there and working and that women are also more likely to want a career than previously?I obviously don’t know the details but based on conversations over the years most couples have one person with a much higher salary than the other.
I only know of one couple that probably have similar salaries and that’s because they’re lucky to be IT contractors with one “employer” for many years.
Granted, if one person is an exceptionally high earner then the other person is less likely to be, but generally in the middle ground its two people earning a reasonable wage, compared to the man of the house being the bread winner and a stay at home mum maybe working part time.
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