The cost of small cars is no longer small!

motorguy

fred990 wrote: »

Is PCP the next sub-prime crisis?

No. And you know the reasons why. And if you dont, i suggest you research it.

fred990 wrote: »

There's no such thing as a free lunch....or is there?

Who said anything about a free lunch? PCP deals are a facilitation. Some are good, some are bad, a few are brilliant. Its up to the individual to decide IF its right for them or if another mechanism suits them better.

No right or wrong answer.

But you know all that....

motorguy

Deleted_User wrote: »

If you need pcp you can’t afford the car.

PCP is a facilitation. Like leasing with options. If people werent spending £250 a month on a PCP, they'd be spending it on a loan to buy a car.

Deleted_User wrote: »

Live within your means.

Agreed. However borrowing money or PCPing / leasing a car doesnt mean you're not living within your means.

So dont borrow money to buy a house?

Deleted_User wrote: »

And yes I think pcp is the next sub prime crisis.

Well, clearly you dont understand what the causes of the sub prime crisis and therefore why car PCP / leasing cant be and wont be

almillar

And yes I think pcp is the next sub prime crisis.

Yep. Only pay for houses and cars with cash - otherwise you can't afford it. Is that it?!!

silverwhistle

almillar wrote: »

Yep. Only pay for houses and cars with cash - otherwise you can't afford it. Is that it?!!

Come on guys. One of those two is a depreciating asset, the other one tends not to be. Don't ruin your argument by being ridiculous about it.



For what it's worth I run a nine year old Hyundai where the only problem I've had beyond routine servicing is an embarrassing incident of the battery going flat which was easily rectified by a new one. It does fully loaded dashes down the French autoroutes with no problem. Cost so far per month £66 plus routine servicing and it's still got plenty of life left in it.



I have absolutely no need for a better car, and no desire to impress anyone with what I own. I fancy an electric car as my next one for various other reasons so maybe I'll splash out: I'll do the calculations when the time arrives but I'm already reckoning on the Hyundai being loose change by then and not in the calculation for any trade-in!


As it happens there's been a fair bit in the heavyweight financial press about PCP etc. being a potential contributor to the next financial crisis. It may not turn out to be but it behoves taking the matter with a bit of seriousness. It may be that the disappearance of some of the better deals is a sign of this happening already.

silverwhistle

AndyMc..... wrote: »

I think it's way over your head.

At least you're consistently unpleasant.

motorguy

silverwhistle wrote: »

Come on guys. One of those two is a depreciating asset, the other one tends not to be. Don't ruin your argument by being ridiculous about it.

Tell that to the people who lived through the financial crisis of 2008/2007. It was the home owners who got rogered, not the car PCPers.

And the point still stands - those who get sniffy about people borrowing money forget they owe probably x10-x20 to the mortgage company, and many of those people might only be a few interest rate rises away from problems. And at least a car PCP is at a fixed rate for the duration.

Credit - whether it be for a house or for a car is not a bad thing. Inappropriate credit is a bad thing.

The two are very different, but it suits some people to merge the two to become credit is a bad thing.

silverwhistle wrote: »

For what it's worth I run a nine year old Hyundai where the only problem I've had beyond routine servicing is an embarrassing incident of the battery going flat which was easily rectified by a new one. It does fully loaded dashes down the French autoroutes with no problem. Cost so far per month £66 plus routine servicing and it's still got plenty of life left in it.


I have absolutely no need for a better car, and no desire to impress anyone with what I own. I fancy an electric car as my next one for various other reasons so maybe I'll splash out: I'll do the calculations when the time arrives but I'm already reckoning on the Hyundai being loose change by then and not in the calculation for any trade-in!

As is wholly your prerogative.

The bit highlighted is interesting though - do you really think people PCP a car to impress others? Probably 90% of new cars are sold on a PCP or lease deal, so rocking up i some new Audi is hardly going to fill your neighbours with awe in the belief you paid for it with £30,000 cash - they're more likely to think (if they think anything at all of it) "oh thats the one that the Audi dealer were doing for £299 deposit and £299 a month." Not really impressing anyone is it?

silverwhistle wrote: »

As it happens there's been a fair bit in the heavyweight financial press about PCP etc. being a potential contributor to the next financial crisis. It may not turn out to be but it behoves taking the matter with a bit of seriousness. It may be that the disappearance of some of the better deals is a sign of this happening already.

Its mostly nonsense and the tabloids are trying to whip up a new scandal. Key differentiators from the 2008ish financial crisis are :-

• The mortgage market is easily x100 bigger than the car financial market. Its a mere minnow in comparison.
• When house prices collapsed here, people were pursued by the banks for the value of their loans anyway - ie, it was us, the consumers problem, with a car PCP or lease, you just keep making the payments and then hand it back at the end of the term. Its their problem. THEY are carrying the risk, not the consumer.

There is no PCP scandal. There may be some tweaks made to the selling process from the outcome of the FCA investigation, but not a "scandal".

And the market is already contracting anyway so any pressure has pretty much left it anyway, because of falling consumer confidence due to Brexit uncertainty and uncertainty over future policy on diesels.

fred990

Indeed. If you have thoughts about securitization/asset backed securities in the auto industry going pop don't worry, just ask your local second hand car dealer for advice about it.....lol.
Something like £30bn over the last four/five years?? The BOE are flagging it up and a treasury committee.
So for the experts......surely the whole thing is predicated on residual values?
How are these worked out?
How robust are these predicted residuals? I guess some brands are rock solid but what about the rest?
Which manufacturer(s) will be without a chair when the music stops?

motorguy

fred990 wrote: »

Indeed. If you have thoughts about securitization/asset backed securities in the auto industry going pop don't worry, just ask your local second hand car dealer for advice about it.....lol.
Something like £30bn over the last four/five years?? The BOE are flagging it up and a treasury committee.
So for the experts......surely the whole thing is predicated on residual values?
How are these worked out?
How robust are these predicted residuals? I guess some brands are rock solid but what about the rest?
Which manufacturer(s) will be without a chair when the music stops?

Firstly, I'm not a second hand car dealer. I'm an observer of the market.

Secondly, are you really worried about securitization/asset backed securities in the auto industry going pop? Because i suspect not.

And frankly I'm not wasting my time giving you an essay on this when the reality is (a) you could find the information out for yourself if you wanted to and (b) you've a very one sided view already and certainly arent going to change. Oh and (c) you do like to troll threads like this to get a reaction.

If someone else wants to, then they can go right ahead.

Other than to say

• the FCA have done an investigation and are about to publish it, so it will be interesting to see what they say and do (general thinking is it will be a bit of a damp squib). Their preliminary findings published back in March concluded nothing shocking. I suggest you read it if you havent done so already.
• the market has already peaked and is in fact dropping so the risk / pressure is abating.
• Used car values are actually up generally over the last five years or so (including factoring in inflation) and there is high demand for good quality used cars (which are harder to find than you'd think)

Long running thread on this subject with inputs from financial experts, motor traders, regular people, etc, if anyone is interested

https://www.pistonheads.com/gassing/topic.asp?h=0&f=&t=1662342

almillar

Come on guys. One of those two is a depreciating asset, the other one tends not to be. Don't ruin your argument by being ridiculous about it.

Plently serious here, just sarcasm against a silly point. PCP is nothing like the 'sub prime' housing crisis. I'm not sure you understand PCP - you're financing a depreciating asset. You go into the deal knowing exactly how much it's going to depreciate! That gets rid of a risk.

As it happens there's been a fair bit in the heavyweight financial press about PCP etc. being a potential contributor to the next financial crisis

Really? The last one was caused by irresponsible lending/borrowing. Credit checks occur when taking out PCP. Either a customer over stretches, and will have to cut back on things, or in extreme cases, VT, or a dealer hasn't explained things clearly, or has lied, about mileage rates for example - you see that in here sometimes. No-one will be losing homes over PCP, and it affects a small number of people, who, I guess, in most cases, only have themselves to blame. PCP has been running for umpteen years - it's not new, and there's no scandal. Look for GAP insurance and all the upselling that goes on maybe if you want a whiff of a scandal.

This site has guides on borrowing money, PCP, car buying. These aren't bad things, they are tools people can use, and should do in the best way - with good advice. We're not here to tell people not to buy new cars or borrow money.
Besides, if no-one buys/borrows these new cars, our lovely second hand cars will get more expensive!

How robust are these predicted residuals? I guess some brands are rock solid but what about the rest?
Which manufacturer(s) will be without a chair when the music stops?

We're talking about consumers, and Guarunteed Final Values. Short term, individually, consumers don't have to worry about residuals in PCP.

buglawton

The very first loan I took was for a new motorbike to use to get to work with. The job was lined up before the bike. I paid half cash half loan. So yes there are use-cases for borrowed money for a motor. But modern PCP is a universe away and seems more connected with upping your lifestyle in a hurry. I do think that PCP accounts for inflated new car prices too.