PCP isn't MSE

fred246

I suppose PCP is like interest only mortgages. Generally a very bad idea but occasionally suits the circumstances.

Cornucopia

fred246 said:

I suppose PCP is like interest only mortgages. Generally a very bad idea but occasionally suits the circumstances.

The only sense in which they are similar is if people enter in to them without understanding the consequences.

In practice, they are actually opposite in effect for the main scenarios in which they are used:   an interest-only mortgage for a main home is a gamble on house-price inflation creating sufficient equity in the property to provide a useful step-up to another property.   A PCP involves actually protecting against the market and fixing an agreed provision for loss of value in the vehicle at the outset - to that extent it is a very conservative product.

Interest-only mortgages haven't been generally available for main home purchase for some years.  Their continued availability for Buy-to-Let is a completely different scenario.

motorguy

Biggus_Dickus said:

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

That takes me back Gc 😁 ;...Endowment mortgages were indeed a wonder product for a while but the lucrative tax advantage they offered was eroded away by Govt legislation almost completely by the early 90’s.

There were many companies that sprang up with the specific intent of purchasing Endowment policies from homeowners.

As a result countless thousand homeowners sold their Endowments for cash,...as did I. The amount of cash the companies were offering defied logic and the decision to sell, for me any way,  was a no-brainer. They were seemingly in a bidding frenzy for several years,...think Tulip Fever.

However, many homeowners, rather than pay-off all or most of their original mortgage, spent their Endowment cash windfall on other things,...and then started to blame everything and everyone (except themselves of course!) when they were unable to pay-off their original mortgage lump-sum when the mortgage term ended.

Those homeowners weren’t mis-sold or badly advised,...they just stupidly buried their heads in the sand for many years,...until the day of reckoning arrived.

 

I think this talk of mortgages and even interest only mortgages illustrates the point about PCPs.  When the products are used correctly they are beneficial for the end consumer.  However they are misused by a small minority (either by misunderstanding the product or attempting to use the product for something its not intended), but that doesnt make the products themselves bad.

motorguy

Biggus_Dickus said:

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

That takes me back Gc 😁 ;...Endowment mortgages were indeed a wonder product for a while but the lucrative tax advantage they offered was eroded away by Govt legislation almost completely by the early 90’s.

There were many companies that sprang up with the specific intent of purchasing Endowment policies from homeowners.

As a result countless thousand homeowners sold their Endowments for cash,...as did I. The amount of cash the companies were offering defied logic and the decision to sell, for me any way,  was a no-brainer. They were seemingly in a bidding frenzy for several years,...think Tulip Fever.

However, many homeowners, rather than pay-off all or most of their original mortgage, spent their Endowment cash windfall on other things,...and then started to blame everything and everyone (except themselves of course!) when they were unable to pay-off their original mortgage lump-sum when the mortgage term ended.

Those homeowners weren’t mis-sold or badly advised,...they just stupidly buried their heads in the sand for many years,...until the day of reckoning arrived.

 

I guess a house, 25 years after the original mortgage was taken out was likely to be worth a multiple of the original mortgage, so not necessarily the end of the world, particularly if say the mortgage was taken out and 25 and they were now 50 - hopefully plenty of time to correct it.  BUT i'm sure, yes there were people who tried to blame others because they had cancelled their endowment and not bothered moving to a repayment mortgage.

I do remember the endowment mortgage scandal, however it seemed - in NI anyway to be more about people's endowments never reaching enough money to pay off the original sum, let alone the "cash windfall" people were promised.  I'd an endowment at the time and i remember the bank writing letters etc urging us to move to a repayment mortgage.  In fact i think at the time they auto converted me over to a repayment.  Long time ago now.  

Biggus_Dickus

motorguy said:

Biggus_Dickus said:

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

That takes me back Gc 😁 ;...Endowment mortgages were indeed a wonder product for a while but the lucrative tax advantage they offered was eroded away by Govt legislation almost completely by the early 90’s.

There were many companies that sprang up with the specific intent of purchasing Endowment policies from homeowners.

As a result countless thousand homeowners sold their Endowments for cash,...as did I. The amount of cash the companies were offering defied logic and the decision to sell, for me any way,  was a no-brainer. They were seemingly in a bidding frenzy for several years,...think Tulip Fever.

However, many homeowners, rather than pay-off all or most of their original mortgage, spent their Endowment cash windfall on other things,...and then started to blame everything and everyone (except themselves of course!) when they were unable to pay-off their original mortgage lump-sum when the mortgage term ended.

Those homeowners weren’t mis-sold or badly advised,...they just stupidly buried their heads in the sand for many years,...until the day of reckoning arrived.

 

I guess a house, 25 years after the original mortgage was taken out was likely to be worth a multiple of the original mortgage, so not necessarily the end of the world, particularly if say the mortgage was taken out and 25 and they were now 50 - hopefully plenty of time to correct it.  BUT i'm sure, yes there were people who tried to blame others because they had cancelled their endowment and not bothered moving to a repayment mortgage.

I do remember the endowment mortgage scandal, however it seemed - in NI anyway to be more about people's endowments never reaching enough money to pay off the original sum, let alone the "cash windfall" people were promised.  I'd an endowment at the time and i remember the bank writing letters etc urging us to move to a repayment mortgage.  In fact i think at the time they auto converted me over to a repayment.  Long time ago now.  

Good post that;...just goes to show that today’s financial wonder products can sometimes turn into tomorrow’s tales of woe;...never more so than in the 80’s and 90’s.

Endowment mortgages, which were interest only mortgages for the entire term, were never particularly cheap but were sold in massive numbers because the mortgage payment itself attracted full tax relief. It was great,..Yippee!,...for a few years anyway, until the tax relief was stripped away, then it wasn’t so great.

Even more so than today, the finance industry in the  80’s & 90’s was awash with what can only be described as thieving criminals, from the lowest sales-staff to the highest company echelons.

When purchasing finance products one must always bear in mind that the ‘seller’ is quite likely to be heavily financially incentivized to sell said finance product;....those financial incentives can result in some (but not all!) salespeople being somewhat less than scrupulous. If purchasing a product don’t take anything you are told at face value,...double-check or even treble-check everything for yourself,... and then hopefully all will be well.

motorguy

Biggus_Dickus said:

motorguy said:

Biggus_Dickus said:

Grumpy_chap said:

fred990 said:

Sea_Shell said:

The earlier comparison to an interest only mortgage was a good one IMO.

They both enable affordability, where it otherwise wouldn't be.

Indeed, as numerous 60-70 year olds are now finding out.
Somehow they're 'victims' and now need 'help'.....no doubt from the taxpayer! 
Most of these finance wheezes eventually have consequences. 

Yes, the endowment mortgages was the financial wonder product of the 1980's so those with them will now be ending work and seeking a relaxing retirement.
There does seem to be, amongst some quarters at least, a notion that if you buy something and it works out less well than hoped / planned for, then that must have been mis-sold and compensation is due.

That takes me back Gc 😁 ;...Endowment mortgages were indeed a wonder product for a while but the lucrative tax advantage they offered was eroded away by Govt legislation almost completely by the early 90’s.

There were many companies that sprang up with the specific intent of purchasing Endowment policies from homeowners.

As a result countless thousand homeowners sold their Endowments for cash,...as did I. The amount of cash the companies were offering defied logic and the decision to sell, for me any way,  was a no-brainer. They were seemingly in a bidding frenzy for several years,...think Tulip Fever.

However, many homeowners, rather than pay-off all or most of their original mortgage, spent their Endowment cash windfall on other things,...and then started to blame everything and everyone (except themselves of course!) when they were unable to pay-off their original mortgage lump-sum when the mortgage term ended.

Those homeowners weren’t mis-sold or badly advised,...they just stupidly buried their heads in the sand for many years,...until the day of reckoning arrived.

 

I guess a house, 25 years after the original mortgage was taken out was likely to be worth a multiple of the original mortgage, so not necessarily the end of the world, particularly if say the mortgage was taken out and 25 and they were now 50 - hopefully plenty of time to correct it.  BUT i'm sure, yes there were people who tried to blame others because they had cancelled their endowment and not bothered moving to a repayment mortgage.

I do remember the endowment mortgage scandal, however it seemed - in NI anyway to be more about people's endowments never reaching enough money to pay off the original sum, let alone the "cash windfall" people were promised.  I'd an endowment at the time and i remember the bank writing letters etc urging us to move to a repayment mortgage.  In fact i think at the time they auto converted me over to a repayment.  Long time ago now.  

Good post that;...just goes to show that today’s financial wonder products can sometimes turn into tomorrow’s tales of woe;...never more so than in the 80’s and 90’s.

Endowment mortgages, which were interest only mortgages for the entire term, were never particularly cheap but were sold in massive numbers because the mortgage payment itself attracted full tax relief. It was great,..Yippee!,...for a few years anyway, until the tax relief was stripped away, then it wasn’t so great.

Even more so than today, the finance industry in the  80’s & 90’s was awash with what can only be described as thieving criminals, from the lowest sales-staff to the highest company echelons.

When purchasing finance products one must always bear in mind that the ‘seller’ is quite likely to be heavily financially incentivized to sell said finance product;....those financial incentives can result in some (but not all!) salespeople being somewhat less than scrupulous. If purchasing a product don’t take anything you are told at face value,...double-check or even treble-check everything for yourself,... and then hopefully all will be well.

Yes, i remember we'd an endowment on our first house mortgage and it was sold on the "windfall" you'd get at the end when the endowment paid out far more than the amount required for the mortgage.  Complete lies in hindsight.

Grumpy_chap

Biggus_Dickus said:

Good post that;...just goes to show that today’s financial wonder products can sometimes turn into tomorrow’s tales of woe;...never more so than in the 80’s and 90’s.

We (collectively and globally) are still paying the fallout of the financial wonder products of the 1980's and there is quite possibly still more to come.  The forecasts made by actuaries led to "innovative" products such as endowment mortgages and also the massive pension black holes that are causing the failure of big companies even today.  Pension management and fees remains poorly regulated as no government (of any political colour) has the courage to stand up to the status quo.

Are we off topic?  

Cornucopia

Grumpy_chap said:

Are we off topic?  

Yes - there could be any number of bad financial products now or in the past and it would still prove nothing as far as PCPs are concerned.

motorguy

Cornucopia said:

Grumpy_chap said:

Are we off topic?  

Yes - there could be any number of bad financial products now or in the past and it would still prove nothing as far as PCPs are concerned.

I dont think anyone has said it would prove anything re; PCPs other than any of these products when used properly can and did benefit the end user.  Millions - tens of millions - of people used endowment mortgages successfully.  Many have used interest only mortgages successfully.   Hundreds of millions have used mortgages succesfully.  There will always be a small minority of people who manage to get themselves upside down though with any financial product.  

And the global financial crisis was caused by inappropriate lending (primarily in the states) and financial institutions lying like weasels about it, not by lending itself.

I dont believe PCP or PCH is a bad product.  Many tens of millions maybe even hundreds of millions have used it succesfully.

powerful_Rogue

The other half has had 3 cars on PCP, 2 since we met.

Her reasoning was when she got her first car many moons ago, it cost her a fortune to get it through an MOT on a Woolworths checkout salary. She went PCP as she had none of those worries.

Today was the first time in a long time that she went out and purchased a car, as she is giving her PCP car back on Wednesday. £8500 over 3 years and nothing at the end to show for it. She now has a car she will have paid off in 2 years.

Is PCP MSE? Yes & No. Depends on the circumstances and situation.

Doe's it really matter? Not in the slightest.