Chris Harris on... car finance

Will

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This is literally the same as the other thread from a few weeks ago! ;) :)
 

MCFastybloke

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The whole world has swapped onto a Snap On revolving account,"for only another £2 a week you can have today this new sofa/windows/holiday/car etc lol.
 

elan362

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There is nothing wrong with manageable debt and a lot to be said about the old adage of "renting" rather than buying a depreciating asset , but there is a real issue with affordability.
There is going to be a reckoning coming, where a large section of the population are living hand to mouth, month to month, with a large mortgage to pay along with car payments and CC debts with limited to nil savings. There is going to be a recession which will be long and deep, perhaps even a depression, driven by the 2 horsemen of the apocalypse, Covid and Brexit, which will bring with it widespread redundancy.

Those who are financially exposed will fall.
Yes they may 'only' owe the remainder of a lease or PCP agreement , so typically somewhere less than £20k - 48x£400) but that will be crippling if they are trying to service this debt alongside mortgage, rent Council tax, utilities and other debt.

It will likely be a final nail in the coffin of many... With CCJ / Ballifs etc following on from non payment.

Yes, lease firms and manufacturers are exposed, but they are corporate entities. You, your family members, friends, your neighbours etc are the people at risk.

Grim times are ahead :(
 

MikeInWimbledon

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Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”

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nyssa7

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All the arguments on here seem to be comparing PCP (you’re shooting above your finances) with buying a car outright (ok if you have THAT much money). Before PCP we used the middle option, HP where the car would eventually be finance free if you kept it long enough. Think I did that just twice, my Fiat X1/9 I bought on HP as a 19 year old, I still own (I’m 61), and the Ferrari 348 stayed for another 5 years after being paid off. Every other car has been sold before being paid off, or for the cheaper ones was paid in full - but only once as a new car.

this time round, with a little assistance from Covid, I’ve run past the end of my 4 year PCP. Mercedes have extended it so I have another 3 months to decide what to do next - not sure if they will keep extending or expect me to pay it off one way or another

seems to be a lot of snobbery against PCP. To me it’s simple. It’s a cheaper way of financing a car that might otherwise be bought on HP with the proviso that as you don’t pay it all off, you don’t get so much back. I pay much the same for my CLA45 on PCP as my wife does on her 61 plate Evoque bought with a bank loan. In a couple of years time she’ll own the Evoque, doubt it will have depreciated more than 20% over 4 years so she’ll have enough to start the cycle again and buy a newer one. I’ve still got equity in my CLA so will cover the deposit for the next car, but paying on PCP means I can use the difference between that and what the HP would have cost me, on other things (like buying the wife’s car!)
 
D

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"Chris mentions having to pay more at the end of a lease. That can’t be lease, or PCP"

Maybe he meant that people were expecting (led to believe) there would be enough equity in the car to fund the deposit on the next loaner, but with residuals falling below the GMV, that is not the case.

I recall the few times I looked at PCP, the salesperson was very insistent there would be sufficient equity to fund the next deposit...not surprisingly they didn't agree to adjust the quoted GMV to reflect that belief...
 

elan362

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It's not snobbery about PCP or leasing...
(I had a BMW 335xd on PCP), but I was always nervous about the level of personal debt that carried) and I was happy to VT the agreement and get out of the PCP treadmill.

But the depreciation was running ahead of the payment (480/month)on the car and it was unlikely to show any equity at the end of a 48 month plan. And the car was in negative equity well into the PCP period so it would always cost to get out early

So I've vowed never to buy a new car again, rather look at low mileage 2-3yr motors instead and buy with a cash deposit, supplemented with a small bank loan if required and will be kept for 5+ yrs
 
D

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I think some people overlook that HP / PCP restricts what you can do with the car as it is not legally yours.

An unsecured loan gives you more freedom to trade it in early, modify etc; a bank loan is currently far cheaper than the c10% APR quoted for a used car...
 

elan362

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Cars in general, and changing cars in particular , costs lots of money... :(
A £12k unsecured personal loan is around currently around £350/month over 3yrs. Add a cash deposit of say £10k in the mix and you are able to get into a 2-3yr old nice car with 10-15k Miles on the clock that cost £40-50k new and will go for ages.

After the 3yr loan period your car is likely to be worth at least the £10k deposit, if not a bit more as the depreciation curve has flattened. The longer you keep it, the better it gets.

PCP and Lease are a never ending treadmill... They suit some, but they are hard to get off
 

Petrol Pete

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All the arguments on here seem to be comparing PCP (you’re shooting above your finances) with buying a car outright (ok if you have THAT much money). Before PCP we used the middle option, HP where the car would eventually be finance free if you kept it long enough. Think I did that just twice, my Fiat X1/9 I bought on HP as a 19 year old, I still own (I’m 61), and the Ferrari 348 stayed for another 5 years after being paid off. Every other car has been sold before being paid off, or for the cheaper ones was paid in full - but only once as a new car.

this time round, with a little assistance from Covid, I’ve run past the end of my 4 year PCP. Mercedes have extended it so I have another 3 months to decide what to do next - not sure if they will keep extending or expect me to pay it off one way or another

seems to be a lot of snobbery against PCP. To me it’s simple. It’s a cheaper way of financing a car that might otherwise be bought on HP with the proviso that as you don’t pay it all off, you don’t get so much back. I pay much the same for my CLA45 on PCP as my wife does on her 61 plate Evoque bought with a bank loan. In a couple of years time she’ll own the Evoque, doubt it will have depreciated more than 20% over 4 years so she’ll have enough to start the cycle again and buy a newer one. I’ve still got equity in my CLA so will cover the deposit for the next car, but paying on PCP means I can use the difference between that and what the HP would have cost me, on other things (like buying the wife’s car!)
Why will your wife 'have' to start the cycle all over again and buy a new car ? Is there a law where you live that states no one shall own a car more than 48 months old ?

She could drive it for a few years more - OK, it's a LR product and some say it's best to bin them off before they get 4 years old - but she certainly doesn't have to do so.
 
D

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Why will your wife 'have' to start the cycle all over again and buy a new car ? Is there a law where you live that states no one shall own a car more than 48 months old ?

She could drive it for a few years more - OK, it's a LR product and some say it's best to bin them off before they get 4 years old - but she certainly doesn't have to do so.

The Jones's next door demand it 🤔
 
D

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In a couple of years time she’ll own the Evoque, doubt it will have depreciated more than 20% over 4 years so she’ll have enough to start the cycle again and buy a newer one. I’ve still got equity in my CLA so will cover the deposit for the next car, but paying on PCP means I can use the difference between that and what the HP would have cost me, on other things (like buying the wife’s car!)

Who is going to want a 14 yr old Evoque?

I'll wager your CLA will be worth less than the GMV and will generate no equity...
 

Bobby Dazzler

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Those most vocal on these types of threads are typically those who choose to buy "cash" rather than those who choose to "finance". It's the same on Twitter too, responses to Chris's tweet are 99% from those who choose to buy cash. But most don't just express their own preference, there is often another aspect which includes "people who finance can't really afford the car" to "people who finance are stupid" to "I am considerably richer than yao".

Whether people own a car, or finance a car, if there's an unusual event which dramatically affects someone's income, then it might affect their ability to keep that car. Even if someone owns their car then it doesn't necessarily mean that they can afford to keep it. The reality is that whilst those people receive the income they have been used to then they can afford to run those cars, and when they lose their income then they may not be able to afford to run them any more - and that applies to owning or financing.
 

elan362

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Those most vocal on these types of threads are typically those who choose to buy "cash" rather than those who choose to "finance". It's the same on Twitter too, responses to Chris's tweet are 99% from those who choose to buy cash. But most don't just express their own preference, there is often another aspect which includes "people who finance can't really afford the car" to "people who finance are stupid" to "I am considerably richer than yao".

Whether people own a car, or finance a car, if there's an unusual event which dramatically affects someone's income, then it might affect their ability to keep that car. Even if someone owns their car then it doesn't necessarily mean that they can afford to keep it. The reality is that whilst those people receive the income they have been used to then they can afford to run those cars, and when they lose their income then they may not be able to afford to run them any more - and that applies to owning or financing.
It's nothing of the sort.
It is not a criticism at all, rather It is a general observation that many in Society are in debt to a degree that a small change in circumstances could have a dramatic effect on the it ability to pay their debtors.
This is largely a result of the house prices rapidly outt pacing earnings, but also increaced societal pressure to keep up with the Jones', a have now rather than save up mentality and cheap finance.

The difference between owning and financing, is that if the possession is on finance (and that includes a mortgaged house) if you don't pay the creditor, you risk ending up in court and losing the asset.
If you own it, you at least can't lose it, (except if in the case of a car, it was siezed as collateral against other defaulted debts) but might not be able afford to use it. In that case one could always sell the asset
 

nyssa7

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Why will your wife 'have' to start the cycle all over again and buy a new car ? Is there a law where you live that states no one shall own a car more than 48 months old ?

She could drive it for a few years more - OK, it's a LR product and some say it's best to bin them off before they get 4 years old - but she certainly doesn't have to do so.
A newer one. not a new one. Takes a brave person to run a 12 year old Range Rover which is what it will be by then. If she bought on a PCP she could be driving around in the latest model with full warranty though, for less than her loan is costing 🙀
 

nyssa7

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Who is going to want a 14 yr old Evoque?

I'll wager your CLA will be worth less than the GMV and will generate no equity...
You may well be correct, although I was pleasantly surprised by the asking prices (I know!) of the few comparable ones for sale. Certainly will depreciate far more than my Evoque ever did. But if Mercedes want me in a new car, they’ll have to fudge the figures to make it worth my while. Quite happy to keep it, quite happy to replace with another if “the rent” is much the same, and quite tempted to say f**k it and get a W204 C63
 

nyssa7

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estimate for Range Rover evoque is 38% in 3 yrs,
In my case picked up a 2013 (new at the time) Evoque Dynamic Lux which listed at £47k but cost me much nearer £41k, Mercedes gave me £25k for it at 3.25 years and 47000 miles. Did have final figure of £16k on it at 4 years but would have been punished for putting in way over the 40k miles agreed. Not quite sure why I drove so far in that period, car before did 29k in 3.25 years, car since has done 30k in 4 years.
Evoque depreciation might be worse now, but a few years ago it was much better than most cars around
 

elan362

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In my case picked up a 2013 (new at the time) Evoque Dynamic Lux which listed at £47k but cost me much nearer £41k, Mercedes gave me £25k for it at 3.25 years and 47000 miles. Did have final figure of £16k on it at 4 years but would have been punished for putting in way over the 40k miles agreed. Not quite sure why I drove so far in that period, car before did 29k in 3.25 years, car since has done 30k in 4 years.
Evoque depreciation might be worse now, but a few years ago it was much better than most cars around
So at List price of £47k, £25k is 47% depreciation.
At discounted price of £41k, it's 39%
And at 4 yrs £16k again discounted £41k it's 60% depreciation
 

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