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.

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.

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.?

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

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

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!

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.

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

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.

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.