Bust just around the corner. - ED731PDH

Is the market at saturation point?

www.bbc.co.uk/news/business-41773715

Bust just around the corner. - argybargy

My totally uninformed and non expert opinion is thus:

As the article says, PCPs gave the new car market a boost, some might say artificially so.

And of course the number of Mobility cars has dropped due to government benefit cuts.

The folks with cars on PCPs will tend to keep them, and in the meantime the market will struggle to attract new business unless they get very creative and generous indeed.

Finance is likely to become more expensive with (probably small) interest rate rises likely, which is surely likely to affect sales of new cars more than the second hand market.

Over and out.

Bust just around the corner. - RT

It's said that dealers have suggested that higher values than GMFV will enable buyers to retain equity for their next purchase but that's been oversold and buyers are realising increasingly that there won't be any equity left.

They then have a stark choice - stump up the lump sum to retain the car but few people have that sort of money - or start again, probably at much higher monthly payments.

Remember that rise in Bank of England Base Rate won't just affect new loans, it'll also affect most existing mortgages so households will have less money available for cars.

Bust just around the corner. - oldroverboy.

Dealers (and manufacturers) wanted to trap people into the debt cycle the same as Brighthouse have done with other consumer goods. Everyone wants everything very cheaply and is not prepared to wait.

I saw an advert for an iphoneX for £113 a month, nuts, totally nuts, and who will go for it? The very same group the car manufacturers are tempting into the £139 ish a month PCP trap.

my sister (now retired) has now cancelled their Sky package which with movies and sport had gone to etortionate levels. They are cutting their cloth accordingly in all areas, no new cars, using what they have, and when this car goes in a few years time, no car at all, but they live close to a choice of shops.

A "Good" recession is going to cause a lot of pain!

Bust just around the corner. - csgmart

Finance is likely to become more expensive with (probably small) interest rate rises likely, which is surely likely to affect sales of new cars more than the second hand market.

Over and out.

I agree - to a point. Finance on PCP deals varies a lot - even from the same manufacturer. Audi (for example) have deals from 2.9% APR up to 6.5% APR (and possibly more) depending on the model and trim level. Other brands have similar percentages. As these rates are so much higher than the 'official bank rate' I rather suspect manufacturers will choose to swallow the increase and if selling new cars is a struggle they may choose to drop their rates to attract new customers. This would probably be at the cost of less generous discounts when taking out their finance.

One thing I think most of us will agree on is that there is a downturn coming our way soon.

Bust just around the corner. - Falkirk Bairn

Manufacturers "buy sales" with PCP - low interest rates (often), zero interest rates (sometimes). Depending on the make/model they will subsidise the "monthly cost" to shift the cars.

2/3/4 years later you can in theory buy the car for the balloon price but there is the problem

1) Do you have the lump sum?

2)HP/Loan rates might be 10/12% for many & you have to pay the whole car off in say 2/3 years - It actually might be more per month to do that than take on a "new PCP subsidised manufacturer deal"

£300 HP deal to buy your old car or £300 to PCP a new one........the fly in the ointment is that in the future there may not be the "manufacturer deal" or the low % loans for a new car.

I have said this before - 2 years ago a neighbour PCP's a BMW320d/x-drive for £400/month with a £400 deposit over 4 years

A 6 month old,ex- day rent 320d/xdrive was £2,400 down & £440/month from Motorpoint - the difference? £6,000 Manufacturer subsidy on new car & 3% APR. Motorpoint £2,400 deposit & 12% APR (IIRC) & a poorer deal for the punter.

Without the £6,000 off list & low APR the 2nd hand car would be cheaper per month.

If volumes of sales drop, as they have done of late, can manufacturers continue to offer low interest rates. subsidies or will they be forced to increase subsidies to keep the factory production? Difficult choices either way.

If the "man in the street" has debts / loses confidence in his job position it could be a hard stop for both punters & the car trade.

Bust just around the corner. - Manatee

Is the market at saturation point?

www.bbc.co.uk/news/business-41773715

Pretty well I should think. PCP is borrowing. The extra money that went into the car market was a one off, unless people increase further the amount of money they spend before they earn it.

There will be a pullback, and longer it is deferred the worse it will be, like it always is.

The amounts we can borrow are for practical purposes unlimited, and the ignorant, less intelligent and feckless will always take the line of least resistance. Borrowing for consumption is never a good idea, and managing household and personal finances should be a core subject along with sums, reading and writing.

A rise in interest rates will wake a few people up.

Edited by Manatee on 29/10/2017 at 12:11

Bust just around the corner. - nellyjak

A rise in interest rates will wake a few people up

You would think so...but I'm not so sure.

I fear the underlying message of an increase in the interest rate will be largley ignored at a quarter point rise. (which seems the most likely).

The culture has been set...I want it...and I want it NOW.!..and I can get it now...HP/PCP etc

Ego, greed, peer pressure et al have voracious appetites..and so many have been willingly drawn in by the greedy, sneaky slickness of various "trades" who have become adept at showing you that you can have ALL that you want....indeed, must have....TODAY....for what seems just a few pounds.

Let's not talk about the future and what those pounds actually add up to eh.?..and peeps will constantly find they are eventually in the doo-doo...but will it be their fault.?..of course not...it's always someone elses fault surely.?

Bust just around the corner. - concrete

It is not just cars but debt levels in general. They are way too high, as gullible or naive people get enticed into larger loans because interest rates are low. This happened in the 70's when the bank rate went to15%, yes that's right FIFTEEN percent. Luckily when we started our mortgage we built in some leeway for financial problems that may or may not occur. This meant we were able to cope with the resulting rise in mortgage payments. Many of our friends could hardly afford to eat and heat because of the fear of losing their house. The PCP deals etc are just a similar scheme that appears attractive at the time without thought for the possibility of future rate rises, unemployment etc etc. My old mother had a saying:

If your shoelace snaps when getting ready for the day, you are late all day!

Meaning don't cut things too fine and try to allow for problems if possible. Nothing much new in this world.

Cheers Concrete

Bust just around the corner. - RT

It is not just cars but debt levels in general. They are way too high, as gullible or naive people get enticed into larger loans because interest rates are low. This happened in the 70's when the bank rate went to15%, yes that's right FIFTEEN percent. Luckily when we started our mortgage we built in some leeway for financial problems that may or may not occur. This meant we were able to cope with the resulting rise in mortgage payments. Many of our friends could hardly afford to eat and heat because of the fear of losing their house. The PCP deals etc are just a similar scheme that appears attractive at the time without thought for the possibility of future rate rises, unemployment etc etc. My old mother had a saying:

If your shoelace snaps when getting ready for the day, you are late all day!

Meaning don't cut things too fine and try to allow for problems if possible. Nothing much new in this world.

Cheers Concrete

I remember the 15% mortgage rate - just after I moved house in '78 and increased the mortgage from £10,000 to £14,000 - that hurt with everything else that was going on in our lives - but we worked hard, saved what we could and paid it all off in '88

Bust just around the corner. - daveyjp
That PPI refund money was always going to run out.

This bonus has now left many bank accounts and been converted to car depreciation.

If the PPI bonus was used to pay the deposit, this money has now gone.
Bust just around the corner. - argybargy

Most of those who go to debt charities for help are on their uppers because of changes in circumstances: jobs lost, benefits reduced or stopped, relationships broken down, etc. However, a fair smattering are folks who are in employment, sometimes relatively well paid, but who find that their wages are not keeping pace with the inflation which is affecting so many consumer goods and services. They will use credit cards and loans to bridge an increasing gap between income and expenditure and eventually the muck will hit the expulsion unit.

Those people are likely to be hard hit, even if interest rates rise by a fairly modest amount. I don't see things getting better in the near future for anyone but loan sharks and repo companies, and certainly not for those who sell cars for a living unless they can reinvent the whole concept of selling a new car for a nation which, whatever the economists and statisticians tell us when they talk about growth, is teetering on the edge of, if not recession then certainly stagnation.

Another factor which has boosted the market in recent years and which is now receding is the recently wealthy pensioner. Final salary pension schemes are disappearing daily, and their replacements nowhere near as generous. Lots of those who once received significant lump sums on retirement will get much less, and therefore be less likely to chuck fifteen grand at a new car when they can get something a couple of years old at perhaps half the cost.

Edited by argybargy on 29/10/2017 at 20:43

Bust just around the corner. - RT

Wages vs inflation is a double-edged sword - if wages don't keep pace then standard of living goes down but without wages increases related to higher productivity, any wage increases will push up inflation.

One thing baffles me - in my early married years I had to borrow from a money lender who sent a heavy round each week for the repayments - but in those days, the early '70s, the Money Lenders' Act limited interest to 48% per annum - why do we have no similar limit nowadays?

Bust just around the corner. - Falkirk Bairn

>>Another factor which has boosted the market in recent years and which is now receding is >>the recently wealthy pensioner.

If you want a reasonably comfortable retirement you need

1) Own your own home outright - modest is fine, mortgage free is essential

2) No debts CC/loans on retiral day

3) Works Pension(s) - does not need to be huge if you have 1 & 2

4) Savings of some sort for major expense/rainy days - new boiler, car/car repair etc etc & pace the rate of expenditure

5) No trail of Ex's who have a claim to some of the pension!

Lots of retired around in my street - many were on the new car every 2 years on retiral, 3 holidays abroad / year - 10 years on the pace of car swapping has gone down, the holidays are curtailed - looks like the "piggy bank" is emptying for many or they are subsidising their children & grandchildren.

My sons said farewell to handouts soon after graduation & their 1st flat was organised..............grandkids are the ones to benefit when I depart.

Bust just around the corner. - argybargy

>>Another factor which has boosted the market in recent years and which is now receding is >>the recently wealthy pensioner.

If you want a reasonably comfortable retirement you need

1) Own your own home outright - modest is fine, mortgage free is essential

2) No debts CC/loans on retiral day

3) Works Pension(s) - does not need to be huge if you have 1 & 2

4) Savings of some sort for major expense/rainy days - new boiler, car/car repair etc etc & pace the rate of expenditure

5) No trail of Ex's who have a claim to some of the pension!

Lots of retired around in my street - many were on the new car every 2 years on retiral, 3 holidays abroad / year - 10 years on the pace of car swapping has gone down, the holidays are curtailed - looks like the "piggy bank" is emptying for many or they are subsidising their children & grandchildren.

My sons said farewell to handouts soon after graduation & their 1st flat was organised..............grandkids are the ones to benefit when I depart.

Small but probably adequate savings, small mortgage on a half decent house, no claim on my pension, fortunately (unless she runs off with the postman--they do seem to spend an awful lot of time chatting on the doorstep when he's handing over just one letter). Still, fastidiousness has become a way of life for me since early profligacy blew our chances of ever being well off, and I'm usually relatively happy with second best.

Fortunately our children have good jobs and sensible heads on their shoulders, so not too many worries in that direction; and although my daughter is getting pretty serious with her current boyfriend, she insists that when she DOES get married, it'll be a very modest affair. Hmm.

We paid a visit to The Prisoner's gaff at Portmeirion a few years back and it struck me that most of the visitors were folks of a certain age, probably retired and fairly well off. How attractions like that will fare when final salary (or "gold plated" as pension-deprived private sector workers used to call them) pensions have gone for good and those people are scraping a living through small pensions and part time work, I really don't know.

Edited by argybargy on 30/10/2017 at 08:18

Bust just around the corner. - Big John

Is part of this because of the change in car tax earlier this year - this caused a big blip with people buying before the deadline?

However I shy away from finace deals due to my highish annual mileage (15k+). I ignore depreciation by finding a good value end of model car or nearly new high depreciator (or both) and buy outright and effectively throw away after a few years.

The main reason for this is you don't know when your circumstances could change - as mine did 25 years ago when I was made redundant. Since then I've had a long commute but manage "capital" savings costs at about £100 month (my previous Superb was £8200 @ 1.5 years old and I ran it for 10 years).

Edited by Big John on 29/10/2017 at 21:49

Bust just around the corner. - daveyjp

I've seen more than one local dealer offering 3 yearVED as part of the PCP deal. Its wierd how people will happily pay £10-20K to rent a car for a few years, but baulk at £400 VED!

Bust just around the corner. - JEREMYH

I run old cars not because I cant afford new but becuase I am scared to spend money and even more scarred to borrow .

My cars are over 18 years old but I am mortgage free . This is all out of fear really because the work that im in you never know !

Bust just around the corner. - Miniman777

Regardless of the deals on offer, I am slowly forming the view that car dealers already beginning to feel the pinch and times are about to get harder.

In a large East Midlands city where I live, franchised dealers forecourts are bursting with used stock. Much of that I suspect is part-ex for new cars during September, but aside from those who buy new either cash or PCP, I suspect the market for 3-5 year old used cars is over saturated as customers in these price bands are sticking with what they've got with Brexit, financial uncertanty and other woes ahead.

I've never had a PCP plan, always been lucky enough to buy 2-3 year old cars for cash so not trapped in the leasing spiral. Owning a car outright means should things go wrong and I need cash, then I have an asset to sell whereas many are stuck in a PCP deal they could afford then, but not now.

Despite what estate agents say, the market is not as bouyant and people are cautious on big ticket purchases. I've had a house on the market for 4 months, reduced price by £20k and still nothing in the way of an offer.

Would be surprised if a few smaller dealers fall by the wayside in the next 6 months.

Bust just around the corner. - oldroverboy.

I've had a house on the market for 4 months, reduced price by £20k and still nothing in the way of an offer.

A friend has his flat on the market in Rickmansworth... was £485,000 18 months ago, refused £475.000....now £415.000 "guide" asking price....

Desperate to sell.

Bust just around the corner. - Dogfuzz

Very interesting comments. One of the key aspects of this week's almost certain interest rate rise is whether the 0.5% will be sufficient -or will there then be a steady climb to 1% or 2%. I think the latter which will put a heck of a strain on those with mortgages and indeed every other kind of loan.

I see absolutely no harm at all in people having to get rid of their cars because they can't afford the monthly repayments. At long last there just might be fewer vehicles on the road, and more demand for public transport. But hey ho!-I expect i'll be wrong.

Bust just around the corner. - RT

Very interesting comments. One of the key aspects of this week's almost certain interest rate rise is whether the 0.5% will be sufficient -or will there then be a steady climb to 1% or 2%. I think the latter which will put a heck of a strain on those with mortgages and indeed every other kind of loan.

I see absolutely no harm at all in people having to get rid of their cars because they can't afford the monthly repayments. At long last there just might be fewer vehicles on the road, and more demand for public transport. But hey ho!-I expect i'll be wrong.

Everyone needs to get real about where bank rate should be - in relatively normal circumstances, bank rate is 4-6% with inflation at 1-3%, so around 3% higher to give a real return on investments www.thisismoney.co.uk/money/news/article-2387744/B...l

It's only down below inflation because of the dire effects of the 2008 banking crisis.

Bank rate rises back up to the normal rate will be slow and steady - but they will happen eventually so mortgages/loans are going to be significantly more expensive in the coming years.

Edited by RT on 31/10/2017 at 17:47

Bust just around the corner. - gordonbennet

The rate should have gone up years ago, but been held artificially down to prop up our housing and mass immigration based (linked) economy.

How many of us have tried to warn the youngsters in our lives that this cheap money farce could not continue and that there would have to be a reckoning, we all know people who have stretched themselves to the pips squeak to live it all now on borrowed money, new homes cars wives holidays phones you name it.

Bust just around the corner. - Manatee

With GB, we had a choice as to whether we stretched ourselves. It's a stretch now, regardless. My son needs 150k for a 1 bed crappy flat in Hemel Hempstead, around 5 times average earnings. My first house was a 3 bed semi that was less than double the average wage, admittedly in a cheapr area.

Bust just around the corner. - oldroverboy.

With GB, we had a choice as to whether we stretched ourselves. It's a stretch now, regardless. My son needs 150k for a 1 bed crappy flat in Hemel Hempstead, around 5 times average earnings. My first house was a 3 bed semi that was less than double the average wage, admittedly in a cheapr area.

As above, but my mate who wants to downsize and release equity is seething, he blames Bexit.

A friend has his flat on the market in Rickmansworth... was £485,000 18 months ago, refused £475.000....now £415.000 "guide" asking price.... 2 beds, opposite Ricky underground on Chorleywood Road, beautiful small block. Is on 4th estate agents in that time.

Desperate to sell. My estate agent mate says crash coming soon.

Edited by oldroverboy. on 31/10/2017 at 20:12

Bust just around the corner. - galileo

With GB, we had a choice as to whether we stretched ourselves. It's a stretch now, regardless. My son needs 150k for a 1 bed crappy flat in Hemel Hempstead, around 5 times average earnings. My first house was a 3 bed semi that was less than double the average wage, admittedly in a cheapr area.

As above, but my mate who wants to downsize and release equity is seething, he blames Bexit.

A friend has his flat on the market in Rickmansworth... was £485,000 18 months ago, refused £475.000....now £415.000 "guide" asking price.... 2 beds, opposite Ricky underground on Chorleywood Road, beautiful small block. Is on 4th estate agents in that time.

Desperate to sell. My estate agent mate says crash coming soon.

London area prices are insane, if Government (and other institutions based there) relocated to the North or otherwise actually took action to boost the "Northern powerhouse" idea those moving would find excellent housing for well under £200,000 in many areas.

But look at the ressitance the BBC has to transferring some staff to Manchester. The HS2 vanity scheme does NOTHING for the North (except bulldoze lots of recently built houses). The same amount of money spent on improving road and rail links locally would boost business, employment and productivity enormously.

Won't happen, the South East always gets the biggest share of the cake whoever is in power.

Bust just around the corner. - Andrew-T

<< Won't happen, the South East always gets the biggest share of the cake whoever is in power. >>

I agree. I wish it didn't happen, and those prices have been insane for many years. It's mostly driven by the stupid prices foreigners with loadsa money will pay for property they have no intention of living in. I'm just glad it all happens 150 miles from where I live.

When I returned to the UK from Canada 50 years ago I swore not to settle within 50 miles of London. If I did it now I would say 100 miles.

 

Ask Honest John

Value my car