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Car finance deals soar to new record - BBC

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http://www.bbc.co.uk/news/business-39895327

Quote

The value of finance deals used to buy new cars has soared to a new monthly record, according to latest figures.

Motorists spent £3.6bn on car finance deals in March, a rise of 13% on the same month in 2016, the Finance and Leasing Association (FLA) said.

The vast majority of the purchases were via so-called Personal Contract Purchases (PCPs).

The Bank of England and the Financial Conduct Authority (FCA) have raised concerns about such deals.

The Bank's worry is in relation to levels of consumer borrowing.

However Adrian Dally, head of motor finance at the FLA, said lenders were behaving responsibly.

"We do not share their concerns," he told the BBC. "Lending is responsible. This is a sustainable model going forwards."

Popular deals

Both new and used cars can be bought on PCPs, under which buyers effectively rent a car for up to four years.

They can then pay a final lump sum or return a car at no extra cost at the end of a contract - as long as it is within an agreed mileage and in good condition.

Car Finance Deals: Do they spell trouble?

Including used cars, consumers spent a record £32.5bn on car finance deals in the year to March, the FLA said.

March was a record month for car sales as a whole, as it came ahead of changes to Vehicle Excise Duty in April.

The changes particularly affected luxury cars, boosting the value of sales. Following the introduction of the changes in April, sales fell back.

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If you ask me, I think we are at risk of having another Icesave or Northern Rock fiasco because of all this. The big banks, the likes of your RBS, Lloyds, Barclays, etc. were all so badly stung by the last crisis they are still pretty risk averse and are still deleveraging and sticking to relatively safe lending. From what I can see, the baton of risky lending has been taken up by the so called "challenger banks". These are the lads who are up to their oxters in these types of car loans, BTL loans, and various other poorly secured lending. With the economy in decent enough shape, the defaults on this type of lending have just dropped to levels we have not seen since before the financial crisis, and I think this has led many to believe that they are in "new paradigm" mode. As we've seen in Canada with HCG though, this sort of thing can very quickly turn one a dime. 

I think while the UK government is always likely to bail savers out (especially up to the £85k limit), I think it would not be prudent to count that on. I would urge caution to anyone who has a significant amount of money (particularly above the £85k guarantee) on deposit with one of these challenger banks

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1 hour ago, NuBrit said:

If you ask me, I think we are at risk of having another Icesave or Northern Rock fiasco because of all this. The big banks, the likes of your RBS, Lloyds, Barclays, etc. were all so badly stung by the last crisis they are still pretty risk averse and are still deleveraging and sticking to relatively safe lending. From what I can see, the baton of risky lending has been taken up by the so called "challenger banks". These are the lads who are up to their oxters in these types of car loans, BTL loans, and various other poorly secured lending. With the economy in decent enough shape, the defaults on this type of lending have just dropped to levels we have not seen since before the financial crisis, and I think this has led many to believe that they are in "new paradigm" mode. As we've seen in Canada with HCG though, this sort of thing can very quickly turn one a dime. 

I think while the UK government is always likely to bail savers out (especially up to the £85k limit), I think it would not be prudent to count that on. I would urge caution to anyone who has a significant amount of money (particularly above the £85k guarantee) on deposit with one of these challenger banks

I'm not convinced the larger banks are only doing safe lending, I suppose it depends on your threshold for "safe". Re challenger banks doing risky lending, get ready for more, the BoE is looking to reduce their capital requirements:

Quote

 

The move follows a separate announcement last week from Bank of England, which revealed it is now consulting on proposals to give smaller building societies and challenger banks a bit more breathing room on the amount of capital they must legally hold against the loans they make.
This follows several years of lobbying by challenger banks who claimed that tough capital requirements put them at a disadvantage against the big high street banks, which can price loans more cheaply. 
 

http://www.thisismoney.co.uk/money/mortgageshome/article-4263602/Bank-England-make-EASIER-borrow-mortgage.html

 

 

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All of this just screams - GET OUT OF THE FINANCIAL SYSTEM WHILE THERE IS STILL TIME.

And I don't just mean gold - although that is one way, at least.

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Yep,all as expected.People get a car on these contracts and never own anything.Instead of the guy working temp at the factory buying a £3k car and owning it he drives around in the £15k car.Job goes and he cant pay anymore.No car.This is all no different from the sub prime housing crash.People being fed a dream so the financial cost goes to the bankers.

I know plenty of young people in very average jobs getting into these contracts.Instead of using the spare cash to pay down their mortgages/save they want the new car.This is what happens when you miss a rate tightening cycle out.Once things do crack the deflation and crash will be epic.On topic with this,it should also mean there are some very cheap cars going.

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I was at the lights this morning surrounded by 3 16 plate range rover sports That is roughly 200k wrapped in three cartoon giant bejeweled boxes. The other day I was waiting to cross the lights and there was 5 white range rover evoques all queued up. 

This in a shitty  area where the median wage is 20k

This has bubble written all over it. 

 

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5 minutes ago, durhamborn said:

Yep,all as expected.People get a car on these contracts and never own anything.Instead of the guy working temp at the factory buying a £3k car and owning it he drives around in the £15k car.Job goes and he cant pay anymore.No car.This is all no different from the sub prime housing crash.People being fed a dream so the financial cost goes to the bankers.

I know plenty of young people in very average jobs getting into these contracts.Instead of using the spare cash to pay down their mortgages/save they want the new car.This is what happens when you miss a rate tightening cycle out.Once things do crack the deflation and crash will be epic.On topic with this,it should also mean there are some very cheap cars going.

For some of these PCP payments (e.g. £200 or some a month), you could buy a gold sovereign a month and have 12 sovereigns by the end of a year!

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1 hour ago, Lord D'arcy Pew said:

The question is; when sub prime car loans go the same way as sub prime home loans, who gets the bill?

I think we all know the answer to that.

But on top of that, I believe that finance deals are funding the vast majority of 'new car' sales now.  When the jig is up on finance, it's going to leave a lot of auto manufacturers in a tight spot.  Will they get taxpayer funded bailouts too?

 

 

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7 minutes ago, Errol said:

For some of these PCP payments (e.g. £200 or some a month), you could buy a gold sovereign a month and have 12 sovereigns by the end of a year!

I know people making 600 per month payments not including the the running costs which are also much higher.

Even if you wanted a new car and say you budgeted 200 per month and went on a pcp you could get something amazingly nice that done everything, blue tooth sat nav the works and save the 400 per month. End of the year  you would have just under 5 grand. So that is 5 grand a year to say you have a luxury brand car as opposed to a non brand. How much is a brand worth to you? How much ego is wrapped in your possessions?

Did you know Audi accounts for 40% of VAG group profits? This is because margins are not so big on a seat or a skoda but if you take that skoda, rebrand it, give it a fancy interior you can go for a 40% markup :)

So absolutely buy a normal car and spend the money on gold I am completely with that! These people are all mental.

 

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5 minutes ago, Sandwiches33 said:

I know people making 600 per month payments not including the the running costs which are also much higher.

Dont forget the initial rental payment (or whatever its called) on a Merc it is usually somewhere between 5 and 10K.

Then there are potential charges at the end based on excess mileage and hown many dents and scratches it has.

Pisses me off that they are allowed to advertise their wares and use the plug  'you can drive X for only Y per month'.

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4 minutes ago, ChewingGrass said:

Dont forget the initial rental payment (or whatever its called) on a Merc it is usually somewhere between 5 and 10K.

Then there are potential charges at the end based on excess mileage and hown many dents and scratches it has.

Pisses me off that they are allowed to advertise their wares and use the plug  'you can drive X for only Y per month'.

aye your spot on, bloke in my work was explaining his, it has to be kept in showroom condition not so much as a gnats piss on it or they start charging you, he was  panicked cause he already has a couple of scratches which is inevitable no matter how careful you are. 

His service cost 10x what my dealer service cost for the same mileage, they will boot you in the nuts on that too.

The initial rental, on a low brow car it usually 200 per month 200 deposit but the big germans always want a few grand upfront. Its only a few grand fire it on a credit card :) 

So although you could save 400 per month I would bet all in its loads more more. Tyres, services, fuel is extra for hauling around you giant german ego box.

The a life time total pissed away on these cars by many could easily pay for an early retirement or an epic quality of life. Just so you can show off to those around you!

 

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I am forced to live an hour away from work as thats where my family live (to save on rent or buying a currently crashing house). So for 2 years i have been doing the same dull commute over and over. i do it quickly mainly to get home but sensibly with braking distances and never go above a certain speed. I just want to get home and not be held up by every lorry, tractor, caravan, old person. I drive an elise and a rare first gen honda insight, they hold their value and very economical to run due to both being made from aluminium. Time for a rant at these bloody financed cars.

White Landrovers are absolutely tasteless, Chavy horrible markers of people who have zero class at all (landlords?). Really cringeworthy, the kind of people who buy those tasteless curved leather kitchen chairs that you find in cheap indian restaurants as they are 'posh'. At least most of these white vehicles are just run-abouts for lady owners and although driven poorly, without much vehicle control, are slower, and sort of bumble about. 

I find BMW saloon drivers to be actually quite sensible, now i dont live anywhere near Bradford that is. But genuinely surprised that BMW drivers are actually really good drivers.

Audi/VW saloon drivers seem to think they are driving souped up supercars, when most are bog standard cars, never let me past in my Elise even if its obvious they are holding me back. Real ****S. The kind of person who would overtake you at stupid speeds over 110mph to show how much of a big man they are, then slow you down to 78mph as they didn't really fancy going that fast at all, they just wanted to be ahead of you, to show you how great they are. Sometimes i find larger landrovers and X5 type vehicles again thinking that due to their cars being worth stupid amounts, they they must somehow be the most powerful things on the road, but then poo themselves as soon as any kind of corner comes up, again never letting me past.

But the absolute worst drivers by a country mile, are actually VW Camper type vehicles, especially the newer ones the T5 variants etc. The kind of people to deliberately pull into overtaking lanes, and match the speed of a lorry. then try to make sure that only they can get past. These drivers are the absolute worst by far, creating rage in all the other drivers they have held up to the point of dangerous driving. But i think this is all due to 'ego' type vehicles. The kind of people to buy these vehicles care about image and Ego.

plenty of people are not successful, they are too lazy or stupid, or simply made poor life choices. So they are excellent people to flog overpriced cars to. The perfect mark. The kind of people who want to be successful besides their own shortcomings, and can make yet another poor life choice buying a car that has the imagine they perceive (no one else does) to be of someone successful.

The reality is that everyone else doesn't think your successful, they think your a moron for renting an overpriced bog standard branded car. your literally paying all that money to buy a big 'moron marker'.

I think the exception to this rule is company cars, usually very posh BMW's which seem to not be driven by debt heads but company heads. I doth my cap to you sirs. 

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22 minutes ago, Sandwiches33 said:

aye your spot on, bloke in my work was explaining his, it has to be kept in showroom condition not so much as a gnats piss on it or they start charging you, he was  panicked cause he already has a couple of scratches which is inevitable no matter how careful you are. 

 

Know a few people who have had to have valeting and cosmetic work on the outside of their cars done just so they don't get charged 

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1 minute ago, reddog said:

Know a few people who have had to have valeting and cosmetic work on the outside of their cars done just so they don't get charged 

My mate worked in one.He had one return and said nothing to pay all ok.His boss sent him back out to find something he was so shocked.He didnt,but it shows what a scam it is.

Funny enough it was about 7 years ago and i asked him how come everyone has new cars who have crap jobs/skint.He laughed and said because they dont own them,and told me all about this pcp thing.He worded it as they had found a way to flog cars people couldnt afford,get them to pay for all the depreciation,own nothing at the end and start all over again.I always notice new estates are the worst.People get the new house and then all seem to get a new car.I guess you have to keep the image up.Then again,the cars look as big as the houses.

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8 minutes ago, jiltedjen said:

I am forced to live an hour away from work as thats where my family live (to save on rent or buying a currently crashing house). So for 2 years i have been doing the same dull commute over and over. i do it quickly mainly to get home but sensibly with braking distances and never go above a certain speed. I just want to get home and not be held up by every lorry, tractor, caravan, old person. I drive an elise and a rare first gen honda insight, they hold their value and very economical to run due to both being made from aluminium. Time for a rant at these bloody financed cars.

White Landrovers are absolutely tasteless, Chavy horrible markers of people who have zero class at all (landlords?). Really cringeworthy, the kind of people who buy those tasteless curved leather kitchen chairs that you find in cheap indian restaurants as they are 'posh'. At least most of these white vehicles are just run-abouts for lady owners and although driven poorly, without much vehicle control, are slower, and sort of bumble about. 

I find BMW saloon drivers to be actually quite sensible, now i dont live anywhere near Bradford that is. But genuinely surprised that BMW drivers are actually really good drivers.

Audi/VW saloon drivers seem to think they are driving souped up supercars, when most are bog standard cars, never let me past in my Elise even if its obvious they are holding me back. Real ****S. The kind of person who would overtake you at stupid speeds over 110mph to show how much of a big man they are, then slow you down to 78mph as they didn't really fancy going that fast at all, they just wanted to be ahead of you, to show you how great they are. Sometimes i find larger landrovers and X5 type vehicles again thinking that due to their cars being worth stupid amounts, they they must somehow be the most powerful things on the road, but then poo themselves as soon as any kind of corner comes up, again never letting me past.

But the absolute worst drivers by a country mile, are actually VW Camper type vehicles, especially the newer ones the T5 variants etc. The kind of people to deliberately pull into overtaking lanes, and match the speed of a lorry. then try to make sure that only they can get past. These drivers are the absolute worst by far, creating rage in all the other drivers they have held up to the point of dangerous driving. But i think this is all due to 'ego' type vehicles. The kind of people to buy these vehicles care about image and Ego.

plenty of people are not successful, they are too lazy or stupid, or simply made poor life choices. So they are excellent people to flog overpriced cars to. The perfect mark. The kind of people who want to be successful besides their own shortcomings, and can make yet another poor life choice buying a car that has the imagine they perceive (no one else does) to be of someone successful.

The reality is that everyone else doesn't think your successful, they think your a moron for renting an overpriced bog standard branded car. your literally paying all that money to buy a big 'moron marker'.

I think the exception to this rule is company cars, usually very posh BMW's which seem to not be driven by debt heads but company heads. I doth my cap to you sirs. 

Haha great rant.

Land rovers - if it wasn't for chrysler/fiat/jeep would be bottom of every consumer reliability and satisfaction survey. Bought by people who know nothing about cars but want lots of status. Hilariously terrible cars only these morons could keep them in business. Many a time I sit in jams in car parks as tiny blondes try to park one. I seen someone complaining in, I think it was the daily fail, recently about how unreliable and crap there evoque was. Lots of sad face, it cost them 45k. I had no pity 5 minutes on the internet and you can check any car, what owners say, warranty studies, reliability etc. They spent 45k and didn't do any checks at all. Blinded by ego and a perceived need to lord it. ******ing morons.

My dad had a lovely 5 series as his company car and was exactly as you speak. He didn't pay anything for it but was gutted when he retired, he hasnt owned a car since as he would have to use his own money :) 

Well done to you for living the dream with an elise. If I seen you I would doth my cap to you for your commitment to motoring. I have long since given up my love of driving, its just transportation to me now but I do love cars.

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8 minutes ago, durhamborn said:

My mate worked in one.He had one return and said nothing to pay all ok.His boss sent him back out to find something he was so shocked.He didnt,but it shows what a scam it is.

Funny enough it was about 7 years ago and i asked him how come everyone has new cars who have crap jobs/skint.He laughed and said because they dont own them,and told me all about this pcp thing.He worded it as they had found a way to flog cars people couldnt afford,get them to pay for all the depreciation,own nothing at the end and start all over again.I always notice new estates are the worst.People get the new house and then all seem to get a new car.I guess you have to keep the image up.Then again,the cars look as big as the houses.

No, no don't look behind the curtain.

8a8e8ae9c8062d92ccd6ec160b306eb4_-the-wizard-and-cowardly-the-man-behind-the-curtain-clipart_500-333.jpeg

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yeah its surprising me (working in a manufacturing quality role), just how poor the landrover vehicles are. I have even been in quality classes where they referenced the quality standard of JLR, yet these big vehicles are just terrible. Perhaps its just the shear forces involved in these mammoth cars, being driven by people treating them like a normal hatchback and stressing the various components too much? either way, they are not smart buys. 

perhaps its just the shear demand from the endless amount of debt heads. rushing production, too busy for decent quality checks? they must be selling like nothing else. 

my vehicles are very geeky, bang for your pound is key for me:

1. Dont depreciate (actually appreciate)
2. Reliable (both take an absolute hammering)
3. you get a lot for your money with aluminium cars, 40MPG (which i never get) in the elise and a real world 80 MPG average in the honda.

these cars are based upon research and not wanting to pee money away, and they are fun also. That hows you should buy cars, not committing your life earnings for a chavy ego debt marker. Better for the environment also. 

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I knew a bloke who worked as an engineer for land rover and he was the first to illustrate to me just how shonky they were, They are so bad that the dealers often have to "finish" them off by this i mean screw bit son that are hanging off and finish paintwork. Of course if a bunch of brand morons are begging to buy your shitbox why would you bother trying to address quality issues?

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I was thinking of getting the misses a T5 camper (as both mine are 2 seaters) so she can actually move stuff around. And I live in Cornwall. But I have been mentally scarred. 

plus due to finance morons T5's are actually quite expensive. and I fear it's going to be hard for her to drive 

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4 hours ago, Sandwiches33 said:

I was at the lights this morning surrounded by 3 16 plate range rover sports That is roughly 200k wrapped in three cartoon giant bejeweled boxes.

Thorstein Veblen saw right through this nearly a hundred years ago. What is strange to me is that nearly everyone seems to see themselves as the "leisure class", with a need for conspicuous consumption.

4 hours ago, Sandwiches33 said:

The a life time total pissed away on these cars by many could easily pay for an early retirement or an epic quality of life. Just so you can show off to those around you!

I guess they value status more than those other things. It seems strange, but it's not impossible.

3 hours ago, Sandwiches33 said:

Land rovers - if it wasn't for chrysler/fiat/jeep would be bottom of every consumer reliability and satisfaction survey.

Perhaps reliability doesn't quite satisfy it, but the huge servicing costs of some of the German brands are surely part of their appeal as Veblen goods?

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4 hours ago, Sour Mash said:

I think we all know the answer to that.

But on top of that, I believe that finance deals are funding the vast majority of 'new car' sales now.  When the jig is up on finance, it's going to leave a lot of auto manufacturers in a tight spot.  Will they get taxpayer funded bailouts too?

I don't think it's as bad as sub-prime housing: My impression is that the people hiring on PCP have a relatively limited liability, in that they can just hand the car back at the end of the term. It's the car manufacturers (or their finance arms) which are heading for annihilation. However, in contrast to the banks, I don't think there is a good enough political case for bailing them out: you can't argue that the UK economy will disappear if there are suddenly lots of cheap second-hand cars. It's going to be terrible for those employed in car manufacturing, and hugely deflationary (as durhamborn is projecting), but my guess is there will be no bailout in this case.

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6 hours ago, Lord D'arcy Pew said:

The question is; when sub prime car loans go the same way as sub prime home loans, who gets the bill?

Oh oh oh ..

Is it us?

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I'd never buy a brand new car. It's a deprecating asset, insurance, maintenance, petrol, cleaning... modcoms.... hope they can afford the make the payments...

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