BoE investigates 'terrifying' rise in borrowing to fund new car purchases

[Saving For a Space Ship]

  PCP car deals: hidden insurance trap revealed

http:// www.telegraph.co.uk/financial-services/motoring/pcp-car-deals-insurance-trap/

Quote

....New cars will almost always start going down in value from the moment you buy them, so if you need to make a claim, insurers will only compensate you for the current market value, and not the value of the car when it was brand new - leaving you with a shortfall to pay.

So with PCP car deals you could be faced with unexpected bills if you have an accident, or if your car is stolen, as the ‘protection’ it offers only comes once the PCP loan term comes to an end, when most people hand the car back.

And with 450,000 vehicles written off every year in accidents, and over 76,000 stolen, the risks are high. There has been a significant rise in motorists defaulting on payments for new car loans, with the total amount of car finance debt going up 15% in the past year.

MotorEasy founder, Duncan McClure Fisher, said:

“Before that settlement figure is paid at the end of the agreement, you are just as exposed as with any other finance arrangement.”.....

  The Auto Industry Has Hit a Worrying Peak, Doug Kass Reveals 8 Telling Reasons Why  

https://www.thestreet.com/story/14230266/1/peak-autos-market-musings-doug-kass-views.html

Quote

1. Car companies are offering the largest incentives on price in years.

2. The automobile inventory-to-sales and days-to-turn-sales ratios are back to elevated 2008 levels.

3. Used-car prices (the Manheim Index) have steadily declined.

4. A record level of autos are going off lease and will return to and further depress the used-car market.

5. After years of subsidized, low-rate auto loans, the consumer is spent up, not pent up, as car sales have been pulled forward.

6. Subprime auto loan delinquencies are ratcheting higher, and some auto lenders are turning away from the market.

7. Managements have poorly prepared for the auto down cycle.

8. The risks of protectionism and trade wars have recently increased.

 

Edited August 8, 2017 by Saving For a Space Ship

[Saving For a Space Ship]

UK car lenders vulnerable after surge in risky loans - BoE

http://www.irishtimes.com/business/transport-and-tourism/uk-car-lenders-vulnerable-after-surge-in-risky-loans-boe-1.3187607 

Quote

UK auto lenders are increasingly vulnerable to a drop in used-car prices after a surge in risky loans, according to a post published on the Bank of England’s (BOE) staff blog Tuesday.

It’s the latest central bank salvo in a raging debate over whether years of low interest rates have spurred a wave of loans that will lead to rising defaults.

At issue are Personal Contract Purchases, under which drivers make a deposit and rent a new car instead of buying it. Such deals may be susceptible should vehicle values fall significantly and lenders are left with a fleet of low-value automobiles after the contracts expire, the BOE staff said.

“The industry continues to accumulate credit risk, predicated on the belief that used-car values will remain robust,” BOE Agencies Division members Tim Pike, Phil Eckersley and Alex Golledge said in the Bank Underground post...

‘Deep’ Subprime Car Loans Hit Crisis-Era Milestone 

https://www.bloomberg.com/news/articles/2017-08-15/-deep-subprime-car-loans-hit-crisis-era-milestone-as-woes-mount

[darkmarket]

37 minutes ago, Saving For a Space Ship said:

UK car lenders vulnerable after surge in risky loans - BoE

http://www.irishtimes.com/business/transport-and-tourism/uk-car-lenders-vulnerable-after-surge-in-risky-loans-boe-1.3187607

From the BoE post cited in the Irish Times article (my emphasis):

Quote

Conclusions

Although weakening, UK new car sales remain at historically high levels. That is partly because car manufacturers and their finance houses are increasingly stimulating private demand by offering cheaper (and new) forms of car finance. As amounts of consumer credit increase, so do the risks to the finance providers. Most car finance is provided by non-banks, which are not subject to prudential regulation in the way that banks are. These developments make the industry increasingly vulnerable  to shocks.

https://bankunderground.co.uk/2017/08/15/car-finance-whats-new/

This from the organisation providing the cheap credit, in the multiple forms of direct corporate bond purchases from those finance houses, the TFS and monetary policy. And they wrap up saying they're not even feigning vigilance with the non-bank lenders. The Bank of England is becoming a serious threat to the UK.

Edited August 16, 2017 by darkmarket

[Funn3r]

Completely agree for what's in store for used car residual values.

I have been having a huge battle with my ex-wife, ah nostalgia it's almost like when we were still married. Petrolhead son is having a leasing deal and she thinks it's a terrible mistake and he should buy new instead. I think cars are an utter waste of money but if he has to spend large on one at least the fleet company (not him) will be stuck with the unexpectedly worthless car in three years. 

[Saving For a Space Ship]

More from the US

 Making Sense: There’s Something Odd In The Auto Market

https://learnbonds.com/134987/making-sense-theres-something-odd-in-the-auto-market/

Quote

...Not spoken often, except around the time auto sales are reported, are the troubling conditions in the auto credit space. As I have reported, periodically, since my Citigroup days, lending reforms imposed on the mortgage banking industry were deliberately not imposed on the auto finance industry. This was done to help the U.S. auto industry to recover from a near-death experience and to, as best as possible, save union auto jobs.

The result is a true bubble in auto lending and in auto production. Today, investors are becoming more discriminating regarding the auto loan collateral in which they invest. At the same time, the used car sector is being flooded with off-lease low mileage used cars. Throw in an aging population, the lowest incidence of young licensed drivers, since before WWII and a preference for urban living, and it just might be that we have already seen peak autos or peak autos per capita....

...I believe that an editorial published by Bloomberg News speaks volumes:

“Although the amounts involved are much smaller than with subprime mortgages, the irresponsible lending will have consequences. Impossible interest payments are ending in repossession and driving families deeper into poverty. Artificial demand has set automakers up for a fall that may already be underway, with sales down about 8 percent in July from their most recent peak in December. Losses could ultimately destabilize markets, cutting off credit to worthy borrowers.”..

 

Edited August 16, 2017 by Saving For a Space Ship

[Saving For a Space Ship]

 UK car dealers feel chill of falling sales

Financial Times

Marshall Motors, another big UK dealership, reported this week that 83 per cent of new and 62 per cent of its used cars were sold on PCP plans.

http://www.ft.com/content/20760daa-840d-11e7-94e2-c5b903247afd

Lloyds pushes £60k car loans without ANY credit checks: Banks become embroiled in row over reckless lending after mass-mailing customers about luxury vehicles

http://www.dailymail.co.uk/news/article-4804210/Lloyds-pushes-60k-car-loans-without-credit-checks.html

Lib Dem leader Sir Vince Cable fearful over second credit crunch

http://www.sundaypost.com/fp/lib-dem-leader-sir-vince-cable-fearful-over-second-credit-crunch/

  The Latest Predatory Banking Practice You Haven’t Heard About: Auto Loans The subprime auto-loan industry is now worth about $26 billion.

https://www.thenation.com/article/the-latest-predatory-banking-practice-you-havent-heard-about-auto-loans/

Edited August 21, 2017 by Saving For a Space Ship

[Sour Mash]

On 16/08/2017 at 7:06 PM, Funn3r said:

Completely agree for what's in store for used car residual values.

I have been having a huge battle with my ex-wife, ah nostalgia it's almost like when we were still married. Petrolhead son is having a leasing deal and she thinks it's a terrible mistake and he should buy new instead. I think cars are an utter waste of money but if he has to spend large on one at least the fleet company (not him) will be stuck with the unexpectedly worthless car in three years. 

It's generally not a great idea to buy new and change it after only 2 or 3 years (taking a huge depreciation hit in the process) but if you were going to do that, a lease seems to be the most cost-effective option.

Once the wheels come off cheap finance, the UK car retail industry is completely screwed.  They have relied on cheap credit to sell nedw vehicles and even nearly-new vehicles too.  At some stage there's going to be a huge glut of first, new, then 2-5 yo secondhand cars as people come off finance and can't afford to buy the car nor get a new finance deal.

[Sour Mash]

1 hour ago, Saving For a Space Ship said:

 UK car dealers feel chill of falling sales

Financial Times

Marshall Motors, another big UK dealership, reported this week that 83 per cent of new and 62 per cent of its used cars were sold on PCP plans.

http://www.ft.com/content/20760daa-840d-11e7-94e2-c5b903247afd

 

I suspect they've been using PCP to flog on 2yo cars that come to the end of a PCH lease.  Still relatively new, low mileage and hence worth a bit.

Stuff that comes back from a 3 year PCP from new goes on the forecourt as approved used stock and they'll sell a regular car loan along with them.

 

That way they get multiple bites of the sales cherry, cream some extra margin on the finance deals too, and essentially keep control of the market for new and used cars up to 5 years old.  At least, until people can no longer afford the finance to buy new cars..... 

[Venger]

On 16/08/2017 at 7:06 PM, Funn3r said:

Completely agree for what's in store for used car residual values.

I have been having a huge battle with my ex-wife, ah nostalgia it's almost like when we were still married. Petrolhead son is having a leasing deal and she thinks it's a terrible mistake and he should buy new instead. I think cars are an utter waste of money but if he has to spend large on one at least the fleet company (not him) will be stuck with the unexpectedly worthless car in three years. 

 

I thought you said he was skint/penniliess.....?   How can he buy the £40,000 car outright vs lease if he's so skint.

Anyway he's an adult and his parents seemingly back him in his choice for £40,000 new cars.  

They can't see the point of saving.

Market.  

If it goes wrong for him/you.... don't come looking at rest of society for a £bailout.  

CBA saving any money !!  (What for?)

He's cruising around in a £40,000 motor !!!  Own choice.

On 03/08/2017 at 0:19 PM, Funn3r said:

I read the article no problem with adblocker (Adaway on Android 6 and Yandex browser.)  

My car-obsessed and penniless son has just signed up for an expensive lease car. I read his small print and if he wants out of the agreement before the end of the three years it is possible but you're fined 3 months payments. So you can't just hand it back because you are bored with it. I guess the article means what if people lose their jobs and hard default unable to pay anything. 

I doubt whether a 40 thousand pound car is genuinely worth that amount.  That's where I think the number fudging is happening. 

It is worth £40,000 when people pay that amount, or sign up to lease deals around the £40,000 list price.

Own choice.

On 03/08/2017 at 9:54 PM, Funn3r said:

Very true. As you can imagine I do not have the kind of view on life which approves of this at all. Bizarrely however I have not stood in his way too much. What alternative could I suggest to him? Save up instead? As if being a saver makes sense any more. Buy a house, you can't go wrong with bricks and mortar? Obviously not and I don't want him getting any weird ideas about debt on a shared hovel. He does listen to what I say but if I leaned on him not to do this he might instead go for a huge motorbike which would be awful.

All my life I have been careful, responsible, and thrifty. Now I am really starting to think maybe I am wrong and you should just blow it on things you like.

Own choice.  If spending it up on high life is his/your choice, don't come casting yourself as a victim if market turns, and you wished you had saved instead of spent on £40K cars and ultra high life, while other people running older cars and slowly building up savings pot.

On 04/08/2017 at 2:01 AM, Venger said:

 

Your adult son made his own choice.

If you're going to blame the car-industry/finance against 'the innocents enjoying high-powered leased motors'....I don't see why I shouldn't offer alternative an alternative perspective, for adults making their own choices.  

If you/he doubt it's worth £40,000 why sign up to the expensive finance deal, which will obviously be arranged around the buying price???

Especially with how you have set it out above.

Younger people in my family and their wider friends are all studying, working and saving, trying to get ahead in life, and advance their careers.   Very few with cars, and those who do have older cars.  

Opportunity is out there.   And with Section24 coming, future looks like it could be good for renter-savers.   Although we sure know about people who defend the house-price-rich don't we... 'Pity The Rich Homeowner' if they can't sell 1-bed flat they own mostly outright for maximum asking price, because they want to buy a house at £700,000..... it because all about their plight at not being able to sell the 1-bed flat. 

Your son made his own choice to buy that car with the monthly leasing £ nut.    You didn't offer alternative advice like buy older car and save up?  Rent and save.  It's what I do, and many others I know of... in hope of market change to house prices (Section24 is coming and BTLers are squealing).  That's our choice in the market.  Obviously if your choice is to see him spend and have fun, £40,000 leased new cars, that's okay with me too, providing you don't later claim 'innocence' into a HPC, where he could have had more money toward a deposit and buying a house.

If you think people should just blow their money, what's the problem?   You 'penniless' son has with his expensive lease motor, to your own view that better to spend than to save.  Both your choices.  They gave him what he wanted.  New car.  A £40,000 new car on lease.   Other people repaying their student debts and getting into careers..... choices.

3 months payment is the penalty to hand it back in first 3 years?  Doesn't sound so bad.  Meanwhile you son chose fun of an expensive motor.  Luxury, reliability and fun - vs many renter-savers (not all.... some have nice cars too... their choice).  

 

On 04/08/2017 at 9:54 AM, Funn3r said:

Yes all very sensible stuff you say. Cannot disagree at all. Apart from the " Rent and save.  It's what I do, and many others I know of". That's exactly what I do too and I have lately begun to feel as if I am the mug for doing it. What is the point in saving when the banks are taking the P with interest rates that are beyond pathetic?  

For context, I am a renter with an 04 year 190Kmiles car.

 

To position for change in the future.   When there's less money around and inflated housing values fall back.  Hope.  

I can't do anything for those who decided to spend away/sign up for £40,000 cars to enjoy it today.

If there is a market change, they made their own (simple/adult) choices for £40,000 nice cars.  Why do they deserve boosting above those who scraped and saved, made-do with public transport or older cars, to get some money together towards advancing their positions?  

I don't get all the 'mis-sold/sold' positioning for new cars, when some of the very same posters worship landlords, seemingly want to become landlords, and prefer landlords renting out property and sneer at prospect of a HPC.  No one is dragging anyone into buying/leasing new cars.  It's a market.  Old cars/cheap cars exist... I've been to enough car auctions at Belle Vue Manchester (Stoodley and... the bigger operator) to find car value.

Quote

If someone needs a cheap car to get to work, then a loan to buy it adds value to the economy; if someone wants a new SUV to consume, then a loan to buy it does not add value to the economy. Advocates claim that such loans "stimulate production," but they ignore the cost of the required debt service, which burdens production. They also ignore the subtle deterioration in the quality of spending choices due to the shift of buying power from people who have demonstrated a superior ability to invest or produce (creditors) to those who have demonstrated primarily a superior ability to consume (debtors).

Also have to laugh at the guy on this thread - a few months ago - who questions what the 'victim's will do if they lose their new flash cars to repo in a market downturn, and asks how they will get to work... and claims it will make matters worse.

Errrr.... older cars.  Positions will still exist for someone else to take if flash-car leasers won't/can't run an older car.   

Anyway, back to the control-squad defending those happily buying/leasing £40K cars, and claiming them the victims... or the right thing to do, but 'want bailout if it turns'.

[Funn3r]

1 hour ago, Venger said:

You didn't offer alternative advice like buy older car and save up?

To position for change in the future.   When there's less money around and inflated housing values fall back.  Hope.  

LOL! From that Venger I am guessing you don't have kids... when did 20-odd year olds start taking advice from their parents. Of course I did even though I knew it was a waste of breath. I am not sure that "save up" is good advice but buy a cheaper/older more practical car certainly is. Although when I was 23 I spent  got  credit for 1.7K on a car when my salary was only 2.2K so I can't be too hypocritical about it.

Saving is getting me nowhere at the moment, some premium bond wins and nought point F'all interest. Although I am still trying to spot the catch in that Ulster Bank 2-percenter. Positioning for the future though I am completely with you on that.

[Venger]

A few people on HPC know of my family situation, not that it really comes into it, for adults making their own car choice decision in the market... (and choosing £40K lease cars).

The Section 24 baby-grow.. bit unfair of me to position that way... was to have a dig at the BTLers... but it does represent my hope for the future.. and why I think it's important to save, even vs low rates.

You're in favour of spending anyway so what's the problem?

Quote

Bizarrely however I have not stood in his way too much. What alternative could I suggest to him? Save up instead? As if being a saver makes sense any more.

All my life I have been careful, responsible, and thrifty. Now I am really starting to think maybe I am wrong and you should just blow it on things you like.

 

Quote

That's exactly what I do too and I have lately begun to feel as if I am the mug for doing it. What is the point in saving when the banks are taking the P with interest rates that are beyond pathetic? 

 

However we make our own market decisions.  I can't stop those who sign up for lease deals of £40,000 cars.  (Their choice, and at least it doesn't affect my finances..... go ahead... less competition for a house in a future HPC.).   I can't stop the BTLers.  I can't stop the HPI++++ spreadsheeters calculating their millions in gainz from future HPI++++ buying at these prices.   I can push back against the view that they are uninformed victims.   They want new cars.. houses (outbidding all others), BTLs to farm other people for rent.

Earning 0% on savings... well some BTLers may one day think they should have taken that, vs losing 50% in value on their BTLs/ S24 taxation, and having to sell their family home to pay other tax (CGT) and repay their creditors.

Other 20-30 years olds running older cars/waling, even though they could qualify for leased newer cars, 

If these car-lease companies begin offering finance to <18 year olds, then you'll all have a point.  It's his adult choice, and you don't seem to be offering much guidance against the idea (with the mother saying should buy it new outright?)...... I know other 20 year old savers who would recoil from thought of splurging on £40,000 car lease-deal.   They're saving for the future.  Positioning for careers.  (As is your son iirc... with a Computer Science Degree..... family member also has Computer Science with AI Degree.... doing alright for himself, but still priced out of housing.).   If those with flash cars later regret their choices, and wish they had saved instead... well they can't have it both ways.  Savers aren't going to carry them around on their shoulders, to boost them infront of themselves with housing.

2 hours ago, Funn3r said:

Although when I was 23 I spent  got  credit for 1.7K on a car when my salary was only 2.2K so I can't be too hypocritical about it.

Car finance is a perfectly valid way to run a vehicle.  Car companies are not charities.   They offer what the market will bear, and they are in competition with so many other car lease companies.  It's a market out there.

[TheCountOfNowhere]

http://www.bbc.co.uk/news/business-41005208

 

"Ford announces £2,000 scrappage scheme for pre-2010 cars"

 

[Maynardgravy]

1 hour ago, TheCountOfNowhere said:

http://www.bbc.co.uk/news/business-41005208

 

"Ford announces £2,000 scrappage scheme for pre-2010 cars"

 

This is just the beginning of the car industry lobbying for stimulus. Expect a major 'green' tax hike on diesel.

[Sancho Panza]

 

30 minutes ago, Maynardgravy said:

This is just the beginning of the car industry lobbying for stimulus. Expect a major 'green' tax hike on diesel.

Let's hope so.Then I can pick up a cheap ex demo diesel for Mrs P.

[Saving For a Space Ship]

Quote

I have worked in the retail motor trade selling new and used cars with attendant F&I add-ons, plus a spell in commercial and fleet sales and have had deep misgivings about the rise and rise of PCP and latterly leasing and contract hire to consumers for most of the last ten years.

The situations that customers bring to us daily and have done for a few years now, especially this last year or so are what I would personally consider "dire", were I in them. Yet the desire to change their car at a relative whim 18-24 months into their last (48 month) agreement, so currently in negative equity is unabated.

Manufacturer finance deposit contributions being used to over the negative equity, and now even separate, specifically designed negative equity loans - created to separate that last transaction from the present one (thus making the halves and thirds rules more easily applicable for the consumer later on) are very on the rise.

Are the wheels about to fall off? Possibly. More likely however that new financial instruments will be created by the manufacturer-owned and run banks/funding houses to maintain present sales volumes/market share etc.

Personally, I'd favour a return to simply outright purchase or straightforward Hire Purchase as the options. But that would create a massive problem with the current parc and see the "premium" - mostly German big 3 brand retailers drop their UK volumes from 200k back to the 60-70k they were at 20 years ago and a return to the mainstream popularity of Ford/Vauxhall/Citroen/Renault etc.

Conflict of morality, certainly. But I also have bills to pay and am only personally liable for one individual's financial decisions - my own. Don't think that we are all completely oblivious and uncaring. Most, maybe - but not all.

Whilst it'd be short-term painful, I'd very much welcome a huge overhaul and better regulation of our industry, to protect consumer's financial wellbeing and dis-incentivise unhealthy/long-term unsustainable behaviours...

 

https://www.pistonheads.com/gassing/topic.asp?h=0&f=23&t=1662342&i

In US - Used-Vehicle Depreciation Surges Amid Rising Incentives, Leasing, Repos

Quote

The used-vehicle depreciation rate has doubled since 2014 as new vehicles continue to flood the market, a record number of off-lease vehicles cause oversupply, and repossessions tick up, according to the latest report from Black Book.

The average used car lost 17% of its value in the past 12 months, bringing the average cost to $15,300, down from $18,400, the report stated.

The cause is three-fold: First, manufacturers continue to promote incentives to push the extra supply off car lots. Average discounts per vehicle rose 5% to about $3,600 in July, compared with the same period the year prior, according to Kelley Blue Book. Additionally, average interest rates on new-vehicle loans hit its lowest level in six months as zero-financing offers made a resurgence, according to Edmunds.com.

Second, rising incentives were coupled with the continued issue of lease penetration. In 2014, 3.6 million vehicles were leased and the majority of those three-year term contracts are coming back to market this year, according to Edmunds data. The problem will only grow in the next two years as a record 4 million and 4.3 million vehicles, respectively, come back to dealerships.

Finally, KAR Auctions is seeing a rising number of repossessions, Bloomberg reported. The company anticipates nearly 2 million vehicles will be repossessed by lenders this year, which is nearly double the 1.1 million seizures lenders handled at the height of the financial crisis.  

Of course, used-vehicle depreciation is bad for lenders concerned about residual values, but it’s also bad for indebted consumers who now owe more on their loan than the asset is worth.

Americans are collectively working to pay off 108 million auto loans, which is roughly half of all licensed drivers, according to Federal Reserve data. As vehicle values decline, those consumers are at more risk of becoming upside down on their loan.

Among those who have more debts than assets — roughly 14% of all Americans — the Federal Reserve said auto loans make up between 10% and 23% of their total financial obligations.

 

Edited August 23, 2017 by Saving For a Space Ship

[Saving For a Space Ship]

Secrets of Your New Car

As concern grows around household debt, Dispatches investigates car finance, with undercover filming exposing questionable sales tactics and confusing advice

http://www.channel4.com/programmes/dispatches/on-demand/66549-001

 

Santander replaces chief of US subprime auto lender unit

https://www.ft.com/content/9bf13770-8c05-11e7-a352-e46f43c5825d   

Edited August 30, 2017 by Saving For a Space Ship

[Saving For a Space Ship]

 

 

Quote

UK car sales fall for 5th month running

Breaking! Britain’s car industry has suffered its fifth monthly fall in sales.

New car registrations shrank by 6.4% in August, extending a sales decline that began in April and has fuelled worries over the UK economy.

It means that sales in 2017 are 2.4% lower than a year ago, with 1,640,241 new cars joining British roads since January.

 

Quote

9h ago 09:20 Diesel sales slide by 21% Diesel bore the brunt of the sales decline in August, the SMMT says: Demand for petrol hybrid and pure electric battery powered cars increased substantially, up 74.9% and 62.5%, while plug-in hybrid registrations rose 38.5%. Conventional petrols grew 3.8% and diesels fell -21.3%.

https://www.theguardian.com/business/live/2017/sep/05/markets-uk-service-sector-car-sales-china-growth-business-live?page=with:block-59ae5a42e4b07c775243ecec#block-59ae5a42e4b07c775243ecec

 

Edited September 5, 2017 by Saving For a Space Ship

[spyguy]

To be honst, with equlaity of cars these days youd expect car sales to be falling.

On PCP. Ive jjust been commenting on a FB arugment about a car left outside someone house for 5days. Brand new mid range Audi. Popel were thinking its stolen. Someone confessed to owning it - but they did not live near where it hadd been *badly) parked.

Whcih up and coming go getter has this car I thoguht.

22 yo girl. Works in a chippy. Left as she could not put petrol in it. 500/m someone mentioned. Lives with parents.

 

[stuckmojo]

1 hour ago, spyguy said:

To be honst, with equlaity of cars these days youd expect car sales to be falling.

On PCP. Ive jjust been commenting on a FB arugment about a car left outside someone house for 5days. Brand new mid range Audi. Popel were thinking its stolen. Someone confessed to owning it - but they did not live near where it hadd been *badly) parked.

Whcih up and coming go getter has this car I thoguht.

22 yo girl. Works in a chippy. Left as she could not put petrol in it. 500/m someone mentioned. Lives with parents.

 

Quite common. New cars are only second to houses in people's self worth priorities in the UK. 

[hi5lo5]

2 hours ago, spyguy said:

To be honst, with equlaity of cars these days youd expect car sales to be falling.

On PCP. Ive jjust been commenting on a FB arugment about a car left outside someone house for 5days. Brand new mid range Audi. Popel were thinking its stolen. Someone confessed to owning it - but they did not live near where it hadd been *badly) parked.

Whcih up and coming go getter has this car I thoguht.

22 yo girl. Works in a chippy. Left as she could not put petrol in it. 500/m someone mentioned. Lives with parents.

 

I am not surprised. I happen to see one of the loan level data GM financial's ABS(of course AAA rated prime lending).  PCP became mainstream on the Q1 of 2015 (at least on this pool) maturing in 36 months. Once the PCP ends the borrowers(average income £23k) are expected to make the average ballon payment  of £5,500. I can't see the borrowers finding this money to make the ballon payment, remember we peaked  unsecured lending couple of months back. Eventually all these cars will be handed back to the finance company and the dealers will need to hire nearby farmland for parking.

[jiltedjen]

9 hours ago, hi5lo5 said:

PCP became mainstream on the Q1 of 2015 (at least on this pool) maturing in 36 months. 

oh dear! 2018 is shaping up to be a pretty interesting year. 

[Houdini]

10 hours ago, hi5lo5 said:

I am not surprised. I happen to see one of the loan level data GM financial's ABS(of course AAA rated prime lending).  PCP became mainstream on the Q1 of 2015 (at least on this pool) maturing in 36 months. Once the PCP ends the borrowers(average income £23k) are expected to make the average ballon payment  of £5,500. I can't see the borrowers finding this money to make the ballon payment, remember we peaked  unsecured lending couple of months back. Eventually all these cars will be handed back to the finance company and the dealers will need to hire nearby farmland for parking.

I think those cars will be handed back regardless. Most people coming off a PCP will be wanting to get another new car on PCP, and those that can't get a PCP deal won't be able to afford the balloon payment... The real question is how many people will still qualify for a PCP deal come January....

 

[hi5lo5]

17 minutes ago, Houdini said:

I think those cars will be handed back regardless. Most people coming off a PCP will be wanting to get another new car on PCP, and those that can't get a PCP deal won't be able to afford the balloon payment... The real question is how many people will still qualify for a PCP deal come January....

 

Not many I would say. The verified income of each borrower  is not very high. They need to find a initial deposit of at least 10% of car value. Again where are we at the Unsecured lending?

[Errol]

Used car prices are going to plummet. There are going to be lots of nice cars going cheap!

[Houdini]

1 hour ago, hi5lo5 said:

Not many I would say. The verified income of each borrower  is not very high. They need to find a initial deposit of at least 10% of car value. Again where are we at the Unsecured lending?

That deposit is in the difference between the cars current value and the balloon payment of the car - mind you we've already discussed the slow movement of borrowers from a Kuga to a Focus to a Fiesta as the remaining difference shrinks change after change.

That's not to say there isn't going to be an impact but I suspect it may be slower than we expect especially for those with a petrol car where used prices are higher due to no-one wanting a diesel...