arsie

Here on Yahoo! news - but I have read similar stories in the gutter press i.e. Daily Excess and Daily Wail.

Interested if anyone can figure a good angle e.g. wait and feast on a buyers' market of an excess of relatively young 2nd hand cars to choose from

djchocice

It's been doing the rounds for a couple of years now this story, but it seems to be gaining more traction of late.

I was speaking to my brother about this today. BMW 235's being an example as I considered getting one last year but prices were still strong on used examples. Now that the 3 year lease deals are closing from when they came out, the value of them has dropped significantly. Ditto for Golf R's and Audi S3's.

The car market has been showing similar signs to the housing crisis of 10 years ago, massively inflated prices for anything with a bit of provenance, people taking out either massive finance or PCP's on anything new, at the end of the 3 years leaving a massive glut of cars that people just don't want due to throwaway/replace nature of PCP/Leasing.

It's been building for a while and the car price/PCP bubble will burst soon, which makes me wonder where that will leave the car market once it happens.

lovegroova

Thi has been doing the rounds as the authorities are now considering having a look into it:
Drivers face car loan crackdown to avoid new financial crisis

The credit rating agencies are concerned, this report from Moody's came out this week, some good charts in it, I think:
Moody's downgrades outlook on virtually all UK consumer debt - Business Insider

Even the bankers are concerned:
UK car finance business has 'exactly the same problems' as the mortgage market 10 years ago - Business Insider

arsie

Not sure the potential is quite the same as with mortgages in the US.

If the value of cars dropped dramatically, due to say a flood of nearly new cars available to compete with new car sales, can you simple walk away, give the keys back to the mortgagor and stop your monthly payments? i.e. do PCPs allow you that option? Or are you liable to make payments for the full term?

What happens if the car is in a crash and becomes a write off? Surely payments cease then?

Or you are out of work or sick and can't afford the repayments?

Nick Graves

Bad loans book.

Remember in the US, people are getting 7-year finance on ancient Camrys and Accords! The sort of people who are the first to become unemployed in a downturn.

It's a bankster racket that I mentioned years back.

The fact that the scam is now out there, probably means there is less chance of smart money getting burned.

But yes, that or student loans could push the banks over again.

The upside means that there will be a lot of late, used cars around in a few years' time, which is good if you want a decent smoker.

Nottm_S2

The US mortgages thing was based around stuff which is now illegal and a lot of incompetence (including by Moodys)

basically people were given loans they could not afford on intro rates they could afford. A time
bomb. Some of these were on static caravans too!

Then the big, bent, banks built instruments to rob pensions by hiding the risk and selling it on.

This is sort of similar in that the cars depreciation isnt covered by the payments but i doubt we've ever done no docs credit here and sub prime arent really your typical PCP buyers so..

someone will take a hit when that chap's Golf R goes back i guess, it wont be a hit like you'd take on a caravan though

maybe i can get a cheapo 135i haha

djchocice

It's dependant on the small print within the PCP/Lease. Some will have clauses built in and provisions that can allow for an adjustment part through the lease for exceptional circumstances. Generally though, you would have to give the car back or the car would be repossessed if you couldn't keep up repayments. There would however be at least some sort of admin/break charge built in with the above, similar to cancelling a car insurance policy part way through.

In event of an accident, the insurance companies would be the ones footing the bill I imagine.

fluffyninja

As mentioned if you want to jump out of a PCP you'd have to check your details so I can't speak for all cases. I did however looked into it when I had the GT86 a few years back since we decided to move house and I wanted to know my options. In that case it wasn't worth it so I didn't bother. If I remember correctly I would have sold the car and then paid the outstanding balance. The difficulty is that you pay the PCP off at a linear rate but depreciation isn't linear but typically by a % loss. That means you lose more early on and less later. That means you're essentially in negative equity as you drive off the forecourt but that essentially comes back you by the time you reach the end of the term.

arsie

Therefore a sudden drop in 2nd hand car prices would increase the negative equity greatly in the early part of a PCP term.

To get out of the repayment schedule you would have to stump up a bigger lump.

Makes sense to me that that would be the case.

Nick Graves

Hence gap insurance...

These things are fine when all is going swimmingly, but when TSHTF is when remorse sets in.

Probably why they engineer these credit crunches and have a feast at mugs' expense...