PCP vs current used car market

iwb100

BillyT57 said:

I'm collecting my new car, on PCP, on Friday. Two years interest free. there are all sorts of incentives out there at the moment, but there are also horrendous delays for some models. I'm reasonably lucky as I ordered mine mid-Feb but orders have been slipping. 

Right that’s good. But can’t believe that was a factory order. You’ve presumably ordered a stock build.

jcrennie

motorguy said:

jcrennie said:

iwb100 said:

jcrennie said:

iwb100 said:

jcrennie said:

iwb100 said:

This comes down to personal situation and priorities. The new Arona, facelift model is nicer than the older ones, so that would be a point in favour of PCP. The interior is quite a bit nicer and the dash has been redesigned. So I’d consider that.

I’d price up a PCP for the car you want. Work out what it would cost. Then look at the second hand market.

You can take a PCP deal and clear it with a much cheaper personal loan which is the cheapest thing to do. And would mean you own the car. But would increase your monthly payments unless you extend the term.

End of the day in your position it’s about what makes most sense and nobody can really advise on that. 

On auto trader you will easily find an Arona under 30K miles for around £11,000-£14,000 if you are happy with the 1 litre engines. So second hand would be comfortably under budget if your loan is comfortable and cheap.

Thanks - I think in the event of a PCP, I'd just rent the car and hand back unless things changed. Guess the big thing for me would be how it would affect what I could borrow for a mortage when I look to move. Can find a good 18/19 plate Arona for £12k, but they are the manual models rather than the automatic ones. Most of my miles are city centre driving, so thinking of making the switch.

The manual Arona is good.  The lady over the road has one. She loves it. I went to help her look at the new ones and she ended up going to an auto on pcp. But yeah. The decision is not really about the car it’s about what your finances dictate. I’d say that you need to decide your mortgage affordability and factor any decision in, because that’s the risk of taking on more debt.

Have you thought about leasing? You can lease the Arona automatic for £207 a month with £1800 deposit. Based on 5000 miles a year. 

If you want a new car and to keep your costs down that might be worth considering. Whether leasing or PCP you will have a wait for a new car…keep that in mind. Unless you stumble on a dealer with some stock coming in will be 4 months plus up to a years wait. 

I've thought about leasing too yes. I think I would prefer to own outright as even though the asset depreciates, I lose less vs just renting. Guess with the used car market right now, I can't help but feel I am overpaying for something which will decrease massively as the price is inflated e.g. 16-17k for a 18/19 played Arona with automatic gearbox.. brand new on the basic specs they are 22k!

If you are doing a PCP and planning on handing the car back then that’s effectively a lease. You are gaining more flexibility in pcp…sell the car when you want and clear finance or buy it, in exchange for higher payments and total cost.

Not sure I follow your logic unless you think you can realise equity from a pcp deal which is very possible but not guaranteed. And you could end up in negative equity. In which case a lease would have been far cheaper.

I am favouring the personal loan option - yes, not a new vehicle but I still have an asset even though it depreciates. My conundrum really is I feel I am overpaying based on what the car will be worth in 3-4 years, as new cars are not depreciating at the same value post covid, although who knows what will happen.

They're not currently, but its an almost odds on certainty that they will revert back to previous depreciation levels.

Firstly, for the big manufacturers its all about market share, so once cars are flowing freely again, they'll discount heavily to get more of their cars on the road.  That will impact used car values

Secondly, we are almost certainly heading for a recession in the country, and / or at very least exceptionally difficult times ahead.  That will impact people buying / changing their cars too, so again i think values will be driven down.

Totally - I am fine with the car depreciating if I own it, but seems silly if I buy at 17k and then it's worth 7k in 48 months time. Maybe I am overthinking it, guess at the end of the day I still have an asset. Some good advice here though.

Grumpy_chap

motorguy said

They're not currently, but its an almost odds on certainty that they will revert back to previous depreciation levels.

Firstly, for the big manufacturers its all about market share, so once cars are flowing freely again, they'll discount heavily to get more of their cars on the road.  That will impact used car values

Secondly, we are almost certainly heading for a recession in the country, and / or at very least exceptionally difficult times ahead.  That will impact people buying / changing their cars too, so again i think values will be driven down.

Two further factors that could influence future demand for cars:

1. People that have been on the PCP-wheel but now exited suddenly realise that they don't need a new car every three years to be comfortable and reliable.

2. People that were doing X miles per year now realise that post-COVID the new normal will be a far lower miles per year because of WFH / Hybrid working and they no longer want to spend the same amount on a car

Herzlos

Grumpy_chap said:

Two further factors that could influence future demand for cars:

1. People that have been on the PCP-wheel but now exited suddenly realise that they don't need a new car every three years to be comfortable and reliable.

2. People that were doing X miles per year now realise that post-COVID the new normal will be a far lower miles per year because of WFH / Hybrid working and they no longer want to spend the same amount on a car

3. People who are saving so much money from WFH / Hybrid working they can spend more on a really nice car.

The lower mileage may mean they are less concerned about mpg, though.

4. People who used to use public transport but either find it's no longer suitable (rail cards don't make much sense if you're only commuting 2/3 days a week) or don't feel safe using them, so need to get a car.

The market could go either way, but generally when there's been a slump in sales of new cars it's followed by a tail of artificially inflated used car prices since the supply of used cars will slow down later (no new cars in 2020 means no 1 year old cars in 2021, and no 2 year old cars in 2022, and so on).

iwb100

Herzlos said:

Grumpy_chap said:

Two further factors that could influence future demand for cars:

1. People that have been on the PCP-wheel but now exited suddenly realise that they don't need a new car every three years to be comfortable and reliable.

2. People that were doing X miles per year now realise that post-COVID the new normal will be a far lower miles per year because of WFH / Hybrid working and they no longer want to spend the same amount on a car

3. People who are saving so much money from WFH / Hybrid working they can spend more on a really nice car.

The lower mileage may mean they are less concerned about mpg, though.

4. People who used to use public transport but either find it's no longer suitable (rail cards don't make much sense if you're only commuting 2/3 days a week) or don't feel safe using them, so need to get a car.

The market could go either way, but generally when there's been a slump in sales of new cars it's followed by a tail of artificially inflated used car prices since the supply of used cars will slow down later (no new cars in 2020 means no 1 year old cars in 2021, and no 2 year old cars in 2022, and so on).

Yeah I’m not so sure that the desire for new cars will slow down. Working from home doesn’t reduce someone’s reliance on a car necessarily. It might increase it. Whereas in the past they may have trained into a city centre picked up their shopping on the way home. They now aren’t doing that. So might need the local supermarket which may not be in walking distance. Or on a bus route that’s convenient.

Cars are becoming more popular and the move to EVs will keep the churn going I think. 

motorguy

iwb100 said:

Herzlos said:

Grumpy_chap said:

Two further factors that could influence future demand for cars:

1. People that have been on the PCP-wheel but now exited suddenly realise that they don't need a new car every three years to be comfortable and reliable.

2. People that were doing X miles per year now realise that post-COVID the new normal will be a far lower miles per year because of WFH / Hybrid working and they no longer want to spend the same amount on a car

3. People who are saving so much money from WFH / Hybrid working they can spend more on a really nice car.

The lower mileage may mean they are less concerned about mpg, though.

4. People who used to use public transport but either find it's no longer suitable (rail cards don't make much sense if you're only commuting 2/3 days a week) or don't feel safe using them, so need to get a car.

The market could go either way, but generally when there's been a slump in sales of new cars it's followed by a tail of artificially inflated used car prices since the supply of used cars will slow down later (no new cars in 2020 means no 1 year old cars in 2021, and no 2 year old cars in 2022, and so on).

Yeah I’m not so sure that the desire for new cars will slow down. Working from home doesn’t reduce someone’s reliance on a car necessarily. It might increase it. Whereas in the past they may have trained into a city centre picked up their shopping on the way home. They now aren’t doing that. So might need the local supermarket which may not be in walking distance. Or on a bus route that’s convenient.

Cars are becoming more popular and the move to EVs will keep the churn going I think. 

I know quite a few people who've had a rethink as to whether or not they really require a new car every three years if its now sitting at the door and only being used for shopping runs / social use.

I think car usage has changed generally.  

Herzlos

motorguy said:

I know quite a few people who've had a rethink as to whether or not they really require a new car every three years if its now sitting at the door and only being used for shopping runs / social use.

I think car usage has changed generally.  

But I bet almost all of them are just considering keeping their cars a bit longer, rather than getting rid of them entirely? Because that's just going to reduce the used car supply and keep prices higher.

motorguy

Herzlos said:

motorguy said:

I know quite a few people who've had a rethink as to whether or not they really require a new car every three years if its now sitting at the door and only being used for shopping runs / social use.

I think car usage has changed generally.  

But I bet almost all of them are just considering keeping their cars a bit longer, rather than getting rid of them entirely? Because that's just going to reduce the used car supply and keep prices higher.

Yes, pretty much.  Thats what we're doing ourselves.

As is my SIL.  Holding on to her own car (previously bought new on PCP).  My BIL is doing the same also - normally changes his Jag every three years.

Of the four of us in the immediate family who'd be a due a change to a new car this year, only one of us is.

Though the comment i was replying to was people continuing to buy new cars, not about the requirement for a car.

Herzlos

My bad, I'd missed the new part and thought we were still talking predominantly about the used market.

iwb100

motorguy said:

iwb100 said:

Herzlos said:

Grumpy_chap said:

Two further factors that could influence future demand for cars:

1. People that have been on the PCP-wheel but now exited suddenly realise that they don't need a new car every three years to be comfortable and reliable.

2. People that were doing X miles per year now realise that post-COVID the new normal will be a far lower miles per year because of WFH / Hybrid working and they no longer want to spend the same amount on a car

3. People who are saving so much money from WFH / Hybrid working they can spend more on a really nice car.

The lower mileage may mean they are less concerned about mpg, though.

4. People who used to use public transport but either find it's no longer suitable (rail cards don't make much sense if you're only commuting 2/3 days a week) or don't feel safe using them, so need to get a car.

The market could go either way, but generally when there's been a slump in sales of new cars it's followed by a tail of artificially inflated used car prices since the supply of used cars will slow down later (no new cars in 2020 means no 1 year old cars in 2021, and no 2 year old cars in 2022, and so on).

Yeah I’m not so sure that the desire for new cars will slow down. Working from home doesn’t reduce someone’s reliance on a car necessarily. It might increase it. Whereas in the past they may have trained into a city centre picked up their shopping on the way home. They now aren’t doing that. So might need the local supermarket which may not be in walking distance. Or on a bus route that’s convenient.

Cars are becoming more popular and the move to EVs will keep the churn going I think. 

I know quite a few people who've had a rethink as to whether or not they really require a new car every three years if its now sitting at the door and only being used for shopping runs / social use.

I think car usage has changed generally.  

That’s true entirely. But the current situation with stock and availability somewhat dictates that too. What happens when new cars are easier to get and dealers start flinging them out very cheap to get the market moving?

Helped a friend order a new car recently and since then I’ve seen ads for the exact car but used say 2/3000 miles on it. The car used is priced at 4-5 grand over the new one. Not to mention If buying on pcp it’s a stupid APR.

So no wonder people still need cars but won’t buy second hand and have to wait a long time for a new one that people are keeping their cars a bit.

But I doubt that will last. At some point it will change.