german car makers rigged market?

[Delayed Steve]

I think most people do PCP as they know exactly what the car will cost over the period they want it for. There is no unknown.

You know how much deposit, you know how much it costs each month.

The ones on PCP will be fine, cash buyers could well be proper ****ed.

Except the ones on PCP won't have a car ,the ones that paid cash will !
The finance companies that took the hit aren't just going to accept it and will be looking for new customers to pay for their mistakes.
Deposits will go up and payments will go up and a lot of people will have no option but to sign up...

 

[tron]

Actually, they do have an option. I have been given good cars, cars that I ran for four years then gave away after 75,000 miles of pleasure.
it is still possible to buy a car with more than a year's life in it for less than a month's PCP payment. Whether snobbery lets you, is another matter. I'm driving a highly prestigious classic Mercedes Diesel estate with all the toys and cachet. It cost me £410. (And I paid too much!)

 

[gIzzE]

Except the ones on PCP won't have a car ,the ones that paid cash will !

Why will they not have a car?

Take out a PCP over 4 years, suddenly 12 months in the bottom falls out the market like in 2009, they still only pay the same for the remaining 3 years.
They sit there knowing they are in a nice car for the next 3 years based on pre crash prices.

The guy who has bought it sees his car that he thought he would be able to sell for £20k after 4 years will now only be worth £10k.
He has lost £10k
The PCP buyer can buy a car outright at the end for £10k, a car that would have been worth £20k before.
The PCP buyer takes advantage of the cash buyers ignorance.


Now of course I may be playing Devils Advocate, but probably best not to look down your nose at those that feel happier to chose a different way to yourself?

I'm not a massive fan of PCP, but I wouldn't be shallow enough to say it is wrong.

 

[magpiemalemerc]

Pcp IS OK if that is what you want i.e.: another car every 3 yrs but if you lose your job or want to buy a house this will be taken into account.After 3 car's on PcP i like the idea of once paid off it's mine if I lose my job I still have transport.Horses for courses I guess PcP's
some will like others will not.
What i got sick of was the price of the car at the end of the agreement it always was lower than what your told from the outset and how can you argue about the real car's cost at the end of 3 yrs ? in the end i thought it was a con.

 

[gIzzE]

I agree and now buy mine too.

But for many, it works.


The mistake many make is leaving negotiating till the end of the agreement, they have you by the balls then.

 

[Delayed Steve]

Why will they not have a car?

Take out a PCP over 4 years, suddenly 12 months in the bottom falls out the market like in 2009, they still only pay the same for the remaining 3 years.
They sit there knowing they are in a nice car for the next 3 years based on pre crash prices.

The guy who has bought it sees his car that he thought he would be able to sell for £20k after 4 years will now only be worth £10k.
He has lost £10k
The PCP buyer can buy a car outright at the end for £10k, a car that would have been worth £20k before.
The PCP buyer takes advantage of the cash buyers ignorance.


Now of course I may be playing Devils Advocate, but probably best not to look down your nose at those that feel happier to chose a different way to yourself?

I'm not a massive fan of PCP, but I wouldn't be shallow enough to say it is wrong.

Firstly I'm not looking down my nose at anyone, what I was trying to say was when and it's more when than if the bottom drops out of the market the finance companies will not take the hit lying down and will pass the losses on to all of us anyway they can.
Secondly whilst I can see the logic in buying a second hand car at the end of the contract I can't see it happening, it's easy to trade up ,difficult to trade down.
A lot of people haven't got the money to buy a second hand car out right so will look at finance and pay a higher percentage rate or they will stump up the higher deposit and monthly payments on a PCP.
The finance companies win either way..

 

[gIzzE]

If the car market starts to fall on its ****, finance houses will not put prices up, they put them down, it has happened a couple of times now, 2009 was the last time.

It is all about keeping production going to keep market share, when markets slow the consumer is the one that wins, no matter what the market is.

So I totally disagree with your way of thinking, not saying you're wrong, just I don't agree.

A few years back anything other than contract hire type agreements were not sensible. You could be in a new E Class for £240 a month all in, £169 a month with 9 months down and 20% vat added. M135i for £159 with the same terms, some got Gold R's for £149 on the same terms. They needed to shift metal, and offering them through silly cheap contract hire deals protected the perception of new car prices, the huge discounts were hidden and they had control of used prices at the end of the term.

Those that bought them lost far more over the same period, even with big 20% discounts on list.

Now things have changed somewhat, the market is buoyant, prices are high, so no really silly deals about. We are seeing an increase in all prices, new prices have climbed pretty rapidly, hire deals are far more expensive and used prices are much higher now than 5 years ago.

If the market slows think what happens to prices across the board? So I stand by what I say, it is those on hire type deals that will be the safest, those that have bought new with cash will be the ones most at risk. Sure the finance houses will get burnt, but right now they have already covered themselves from that with 11-13% apr rates on used products compared with 5-7% apr just a few years back, they have their safety net already.
Now you could argue the consumer is already paying for a crash that has not yet happened, that I agree with, but that is why I am now buying used cars because I don't like huge deprecaition, but many are happy to pay a fixed amount each month and possible pay more now to know no matter what, that is all they will pay.

Also stepping back is not always that much of a hardship, many I know who have done the finance game for the last 30 years have always been in 4cyl models, the ones they sell in numbers, often when the go and buy used they buy an older flagship model, instead of the C200d they get an older E350 or something, often the only downside is they think "Why didn't I do this years ago?"


I have used PCP before, often when things are feeling tighter in the wallet I have done so I know what I am paying each month, with no unexpected bills, but also when I want something more expensive and can play the depreciation curve game.
Buy a 535d sport touring worth £51,000 at 10 month old for £32k, drive it for 2 years and 50k miles and sell it for £27k. Even after paying the interest it only cost me £244 a month, that is cheap motoring for such a car.
I couldn't have paid out £32k in cash, £20k would have been my absolute max, but that would have put me in a late old shape model, and that would have lost £10k over the same period than the new highly desirable model.

So I do see it from both sides, but I also genuinely believe those that do PCP are arguably the safest buys out there when it comes to knowing exactly how much a depreciating asset will cost you.

 

[magpiemalemerc]

My C220 was up at 65plate with 2700 miles with a price of £31000 my car as deposit and the deal was £25000 a bargain for a semi used £38000 + car for not alot of money.Plus interest over the 4 yrs a bargain for a marque car even if it is only a C-Class.

 

[nick mercedes]

those that have bought new with cash will be the ones most at risk.

But isn't the problem that many people have used the car they own as a deposit, and now are tied to renting?

But if interest rates move up, or the PCP bubble bursts (due to too many 36 month old cars) then the people who have got used to a premium German car for £200 a month are in trouble?

 

[gIzzE]

To be fair, you can buy a perfectly decent used car for £2k now, so I don't think they are tied to renting.

So you are saying, don't get a cheap deal now as you may get used to it and may not be available in the future?

Blimey, my mortgage is at .25% above base, on quarter of a million I am paying £210 a month should I move to a 5% rate and pay £1000 a month again in case interest rates go up in the future?

I just don't get your way of thinking to be honest?

 

[Deleted member 6183]

But isn't the problem that many people have used the car they own as a deposit, and now are tied to renting?

But if interest rates move up, or the PCP bubble bursts (due to too many 36 month old cars) then the people who have got used to a premium German car for £200 a month are in trouble?

Only in as much as they may not be able to do what they have previously, they won't lose any cash on their existing unless they were optimistically expecting their car to have enough equity for the next purchase.

It's a bubble like any other, all good until something comes along to burst it, in this case it's likely to be dieselgate, interest rates or something else.

 

[gIzzE]

I have said it time and time again, with cars buy it the cheapest way possible over the period you want to own it, be that cash, hire purchase, PCP or contract hire.

There only right way is the way you feel comfortable with.

 

[nick mercedes]

To be fair, you can buy a perfectly decent used car for £2k now, so I don't think they are tied to renting.

Of course, but a lot of people pretend that anything other than a brand new car will be a costly garage queen - and thus talk themselves into getting dripped up on a new car they may not actually be able to afford.

So you are saying, don't get a cheap deal now as you may get used to it and may not be available in the future?

Well yes, if it involves saying goodbye to your only big asset, or all your savings.

Blimey, my mortgage is at .25% above base, on quarter of a million I am paying £210 a month should I move to a 5% rate and pay £1600 a month again in case interest rates go up in the future?

I think getting used to cheap money is dangerous.

 

[Deleted member 6183]

Blimey, my mortgage is at .25% above base, on quarter of a million I am paying £210 a month should I move to a 5% rate and pay £1000 a month again in case interest rates go up in the future?

No but I'd have a look at reducing your term or putting the full balance on repayment if it were mine.

 

[nick mercedes]

Only in as much as they may not be able to do what they have previously, they won't lose any cash on their existing unless they were optimistically expected their car to have enough equity for the next purchase.

To get to work I have to drive through part of a council estate (not a very nice one either), I've noticed all the 17 plate cars of recent, I counted them, 22!

 

[Deleted member 6183]

To get to work I have to drive through part of a council estate (not a very nice one either), I've noticed all the 17 plate cars of recent, I counted them, 22!

Can't be that rough or they'd all be getting taxis to the shops.

Maybe they are Motobility cars?

 

[gIzzE]

No but I'd have a look at reducing your term or putting the full balance on repayment if it were mine.

I'm currently over paying £1300 a month.

If I move to a standard repayment deal I will be paying off around £700 a month for the same £1500 a month outlay.

I'll stick with my low rate deal thanks!

 

[nick mercedes]

It's a bubble like any other, all good until something comes along to burst it, in this case it's likely to be dieselgate, interest rates or something else.

Party poopers down the BOE think the country is on a bit of a debt binge:

"The Bank of England has told banks, credit card companies and car loan providers that they risk fresh action against reckless lending as it warned of a looming “spiral of complacency” about mounting consumer debt."

"Over the past year, Brazier said, household incomes had grown by just 1.5% but outstanding car loans, credit card balances and personal loans had risen by 10%."

"The past decade has seen the number of cars bought with a personal contract purchase (PCP) plan – under which the car is effectively leased – increase from one in five to four in five. Companies risk losing money if used car prices fall and Brazier said banks involved and the shareholders of car companies would “want to think very carefully about the risks”."

 

[nick mercedes]

"vorsprung durch 'deceit'"

"Millions of Brits could be owed huge compensation packages for buying overpriced German cars"

"The firms are accused of holding secret meetings dating back to the 1990s to fix prices and stay ahead of rivals, The Times reports.

The EU commission has the power to fine companies up to 10 per cent of their annual revenue which could run into the billions.

Almost one in three new cars registered in Britain are made by German companies – nearly 800,000 last year.

And campaigners now say consumers could be due a compensation package that would eclipse the £25billion global bill for the VW emissions scandal.

Share prices for the car giants have already plummeted following revelations of the historic price collusion."

 

[gIzzE]

"The past decade has seen the number of cars bought with a personal contract purchase (PCP) plan – under which the car is effectively leased – increase from one in five to four in five. Companies risk losing money if used car prices fall and Brazier said banks involved and the shareholders of car companies would “want to think very carefully about the risks”."

But of course they have increased, if you are prepared to lose £300 a month, do you buy a 10 year old car or a brand new one with warranty etc.?

Offering the consumer the same lease deals as companies is not a bad thing, we just need to concentrate on explaining basic economics to people.

I use a gaming forum, I'm an old fart on there at 44.
When alot of the 30 somethings said they were not worried about pensions, they have another 30 years and I pointed out if he started now at 35 he would need to put away £1600 a month until he is 67 to get his 'lowly' £30k pension they were all genuinely stunned, I mean took them a day to stop saying I was lying and do some research to find out and come back and, as one said "I'm now genuinely ****ting myself, why has no one ever explained this to me??!!"

If you have a car on PCP for £120 a month and have no other savings, no pension, a mortgage and kids fair enough, you probably need a car and have no other choice. It are those that have the £300 car or even £500 a car that still have no pension, 15 years on their mortgage etc. etc. that are the real worry.
There are plenty of them out there.

We really need to start teaching kids some basic economics and understanding of what life costs us and future financial planning.

Lots of my daughters friends, early 20s, are moaning about not being able to afford a house, but they have the latest phones at £60 a month, Sky, Netflix, Amazon, latest 50" TVs, new or nearly new cars, go out every weekend, holidays 2 or 3 times a year etc. etc.

We lived on Noodles, had a 10 year old TV and drove round in a 15 year old £300 Volvo from the age of 21 to 26 to be able to afford a house. OK, so my mortgage was only £80k, but interest rates were 7-8% and my wage was pitiful. Same house today is probably £290k, but interest rates half, terms longer, and wages twice as high, so it could be doable. Not for all, but for many if they scrimped a bit they could do it.

Anyway, going to jump in the pool, depressed myself now!