Car Sales Boosted By Cheap Credit, But Growth Forecast To Slow

[interestrateripoff]

http://uk.reuters.com/article/2014/11/06/uk-britain-autos-vehicleregistrations-idUKKBN0IQ0SU20141106

Cheap credit continued to boost British new car sales in October, which passed the 2 million mark for 2014, earlier in the year than any time since 2007, industry data showed on Thursday.

The Society of Motor Manufacturers and Traders said monthly new car registrations rose to 179,714 in October, up 14 percent on a year ago and the fastest monthly increase since March.

The rise in October was almost three times as much as September's percentage increase. However, growth may have peaked with the SMMT saying it expected 2015 full-year sales to reach 2.49 million units and remain flat in 2016, which would end the rapid rise in a rare bright spot for the European auto industry.

Total new registrations are heading towards 2.46 million sales for this year, a return to pre-recession levels.

"The October new car market outperformed expectations," SMMT Chief Executive Mike Hawes said. "With economic confidence still rising, customers continue to benefit from attractive financial packages."

Car sales were one of the first signs of consumer demand to pick up in Britain after the 2008-09 financial crisis, but there are now signs the broader economy is slowing after more than a year of robust growth.

Surely this should be car rentals/leases pick up? I wonder how many of these sales are actual sales where you own the car?

Nearly four fifths of new-car purchases are now made on credit in Britain with many customers effectively renting a new car - typically for three years - before trading it in for a new model using a scheme known as a personal contract plan (PCP).

Still great to see that all these sales depend on cheap credit, clearly to boost sales further we need even cheaper credit. I'm waiting to buy a new car on a negative interest rate, it can't be too far off now....

Edited November 6, 2014 by interestrateripoff

[longgone]

http://uk.reuters.com/article/2014/11/06/uk-britain-autos-vehicleregistrations-idUKKBN0IQ0SU20141106

Surely this should be car rentals/leases pick up? I wonder how many of these sales are actual sales where you own the car?

Still great to see that all these sales depend on cheap credit, clearly to boost sales further we need even cheaper credit. I'm waiting to buy a new car on a negative interest rate, it can't be too far off now....

what you save in interest payments you pay for in depreciation , only a mug would buy a brand new car .

but hey this is the uk plenty of mugs who must have the latest thing.

[Snugglybear]

What happens at the end of the lease period? Joe / Jo Bloggs hands the car back. Needs a new car, but has to find the deposit. Unless J Bloggs has been squirrelling money away during the lease period, where is the deposit going to come from? Particularly in the case of those people who used a windfall (PPI) to pay the deposit on the first vehicle.

[Snugglybear]

BTW, Which? has a useful guide on buying versus leasing http://www.which.co.uk/cars/choosing-a-car/buying-a-car/buying-vs-leasing/

[winkie]

what you save in interest payments you pay for in depreciation , only a mug would buy a brand new car .

but hey this is the uk plenty of mugs who must have the latest thing.

Pair up with someone that purchases new car every three years.... one careful owner a new car buyer low mileage and buy from them....sell to someone who wants a two careful owners....no credit required for any transaction.....start putting money away for known excellent quality, well looked after car to purchase in the not too distant future....everyone a winner.

[onlyme2]

The "credit event" that hit the car manufacturers and dealers last time shold have been a lesson. These pig headed morons have based their business again on cheap credit to promote car sales.

The next time there is a "credit event" the whole sector should be told to piss off and sort out its own problems and not come panhandling again to the government taxpayer for handouts.

Edited November 6, 2014 by onlyme2

[winkie]

Sometimes it is hard to find out what the cash price is for a car......they don't want your cash they want your credit/debt......drive away for ONLY £250 PM.

[R K]

The SMMT seem to be one of the few organisations that publish sales as number of units and not £££ sales.

(unless I missed it)

Cheap credit? Very expensive credit! With a few notable exceptions - Skoda for instance.

[The Knimbies who say No]

What happens at the end of the lease period? Joe / Jo Bloggs hands the car back. Needs a new car, but has to find the deposit. Unless J Bloggs has been squirrelling money away during the lease period, where is the deposit going to come from? Particularly in the case of those people who used a windfall (PPI) to pay the deposit on the first vehicle.

The PCP deposit and monthly repayments are based around a well-defined value for a car with x miles and y years old. The PCP sweetener is a 'guaranteed future value' in excess of the likely market value, giving Joe or Jo some 'equity' to use as part/all or a downpayment for the next PCP. Magic.

All fine until a tsunami of PCP returns are looking for buyers on the used market and PPI refunds are waning fast:

http://www.telegraph.co.uk/finance/budget/8402423/Duty-cut-as-Chancellor-unveils-fair-fuel-stabiliser.html

Lowest monthly refunds since Sept 2011, one third down on same month last year.

I guess PPI forms the basis of many people's deposit for a new PCP, and supports the used chain at all levels. It'll take a while to work through, and the refunds although waning are still £300M/month which is a lot of money.

Edited November 6, 2014 by Joan of The Tower

[nnails]

I tried to replace my 10 year old car with 4 or 5 year old. Gave up with idea. My car is worth around a grand and I might as well wait till its broke beyond economicAl repair

[pipllman]

Two points on cars

1. From Hoisington's q3 review, which refers to the US, but doesn't really seem so different from here http://www.hoisingtonmgt.com/pdf/HIM2014Q3NP.pdf (if you don't read the hoisington quarterlies by the way, you should really consider it).

"2014 has witnessed a resurgence of consumer auto and mortgage lending that was achieved by a lowering of credit standards. The percentage of subprime consumer auto loans (31%) returned to the peak levels reached prior to 2008."

2. Acquiring the use of a car plunges a retail customer into a very complex market that not many approach with true rationality. The very best 'total cost of ownership' of a vehicle to suit any particular customer's needs at that particular time when they make the purchase decision depends on so many different factors that one size can never fit all. Of course, managing the demand side is the biggest influence on cost - if you 'must' have a brand new Range Rover, it is always going to cost more than if you 'only need' a 10 year old mid size family hatchback....

[SNACR]

The "credit event" that hit the car manufacturers and dealers last time shold have been a lesson. These pig headed morons have based their business again on cheap credit to promote car sales.

The next time there is a "credit event" the whole sector should be told to piss off and sort out its own problems and not come panhandling again to the government taxpayer for handouts.

I bet it won't be

[The Knimbies who say No]

Two points on cars

1. From Hoisington's q3 review, which refers to the US, but doesn't really seem so different from here http://www.hoisingtonmgt.com/pdf/HIM2014Q3NP.pdf (if you don't read the hoisington quarterlies by the way, you should really consider it).

"2014 has witnessed a resurgence of consumer auto and mortgage lending that was achieved by a lowering of credit standards. The percentage of subprime consumer auto loans (31%) returned to the peak levels reached prior to 2008."

2. Acquiring the use of a car plunges a retail customer into a very complex market that not many approach with true rationality. The very best 'total cost of ownership' of a vehicle to suit any particular customer's needs at that particular time when they make the purchase decision depends on so many different factors that one size can never fit all. Of course, managing the demand side is the biggest influence on cost - if you 'must' have a brand new Range Rover, it is always going to cost more than if you 'only need' a 10 year old mid size family hatchback....

Local free rag has many used car dealers with full-page ads, almost all advertising cars as "£x per week" with no reference to the term of the deal. Last week I noticed a Range Rover Sport was among the usual shed-o-rama offerings.