Talk Morgan Forums Community The Malvern Arms Quarterly Warning On Car Credit Problem

We have discussed this a good few times and from what I can see nothing has changed in the past few years.

The Sunday Telegraph today 6th October has three articles, virtually word for word the same by three of their writers.

It boils down in the end to advising that the credit checks will be more realistic to make sure punters can afford the cars they PCP. Well we have heard that before and nothing happened.

Does anyone here think this will really tighten up the car credit market?


The only difference I can see here is this comment.

"The Financial Conduct Authority (FCA) is preparing new rules designed to protect car buyers from loan mis-selling. The clampdown, due later this year, has already sparked a gear shift.

Hedge fund tycoon Crispin Odey, one of the biggest investors in listed car dealer Pendragon, said the flood of cheap credit is drying up.

“We’re seeing this spike of people saying ‘I’m sorry, we’re not going to lend you the money’,” Mr Odey said. He has hedged his investment in Pendragon with a bet against Lookers. “What we’re talking about is a credit cycle that has been elongated.”

The slowing of Britain’s financing boom is expected to cause motor bosses to rethink their business models. Neil Woodford-backed lender RateSetter has already closed the doors on its consumer car loans arm. Rhydian Lewis, chief executive, said RateSetter was now “free from that [acquisition], we are older and wiser”.

When the finance is provided by the subsidiary of the manufacturer I can't see it drying up.
Selling Gap and other expensive add ons needs to be better controlled. The sales people make more commission on the insurance products than they do on selling the car, which is bonkers.

My experience buying the A35 was that I got additional "dealer contribution support" = discount, by taking a PCP deal, and the Gap and wheel insurance was essentially free.
Two months after taking out the finance I paid it off, with no penalty.
I got a better deal than I would if I'd insisted on paying cash, at the cost of 2 months interest charges.
I also got 3 year free servicing, again, only because I took put a PCP contract.

So I don't have an issue with it.
But I do wonder about the business model Mercedes are using. The sales person told me that about 50% of PCP plans are terminated early, the rest are people who change their cars regularly.

Not just the UK, in Spain the dealer price of buying a car with cash will typically cost 1k Euro more than with a finance deal.

The last two tin tops I got c £1500 off for taking the credit deal and immediately paying off then the credit company.
Our new kitchen & fitted wardrobes similarly were cheaper with 1 years free credit.
Works for me as I pay up before any credit costs hit.

I got two years interest free credit on 50% of the price of the Jag, somewhat pushed on me by the dealer. I should have paid it off straight away but I used the funds for some building work and let it ride. Two years later the value of the $AUD had fallen 10% so I lost out on the deal when I had to change A dollars to Euros to pay out the loan.

I should have put funds into Euros or USD when the AUD was in parity with the USD. Oh for a functioning crystal ball

Isnt this all a bit academic when the value of a new car falls by 40% on average in the first 3 years? I mean, why ever buy new?

They (VW) made the same offer for me on secondhand cars.

As Crispin Odey is Boris Johnson's mate (and funder) who has reportedly made a stack shorting the pound and the British Stock market during this Brexit fiasco, I sincerely hope that Lookers get their dermot together, and Pendragon take a massive hit.

Manufacturers like PCP and PCH because it obscures the price of a vehicle ,it camouflages heavy discounting and distress selling, this is particularly true of premium brands. One of the biggest problems is that buyers estimate their mileage when taking out a contract so you get a lower monthly payment if you low ball that number. It eventually comes home to roost when it comes to the contract end. I was a director of the UK’s largest leasing company and we white labelled some of the big manufacturers ,finance companies take some huge risks which they often don’t fully understand at the behest of thé manufactures.

Rocksolid,

From your contacts in the Industry, do you hear about there been less companies offering these low rates of interest on car purchases or is ita case of the manufacturers will do anything for sales.

If they screw up finance companies or the value of second hand stock at their dealers, then that is a just collateral damage to keep the manufacturer selling cars.