***** This thread is now closed, please CLICK HERE to go to Volume 13 *****
To continue the debate on the effects of the so called Credit Crunch.
Vol: 11 can be found by clicking:- here
All CC related stuff will be decanted in here.
Keep it relevant, motoring is linked to the crisis, any "Yah Booh Politics" will be chopped.
Edited by Dynamic Dave on 01/02/2009 at 01:30
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just curious to know in the present economic climate has anyone here or know of anyone who bought on credit say 2 years ago, who has had car repossesed?
Also did we live beyond our means....ie: must have the latest Ford Focus?
In a way imo the recession has brought us down to earth in a good way.
Thoughts anyone?
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From the Beeb news.bbc.co.uk/1/hi/business/7845630.stm
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I am not sure what I am doing wrong but I am finding it hard to find any decent cars around the £1500, I was interested in a T reg Corsa with FSH and 3 months warranty, it was advertised at above book price at £1300, I went to see it today and was told it was sold at at the asking price :(
He told me that the cars are selling very easily, now is the bottom end of the market becoming more and more popular due to the credit crunch and this putting up prices of bangers?
Certainly from what I can tell there seems to be no real bargains in this area. I would be tempted by a new car as this is where the great bargains seem to be, but I won't get credit and that is of course why the cars are so cheap in the first place!
Personaly I am trading as normal and have yet to see any personal affects of this credit crunch, I have seen changes yes and I don't doubt its serious I just sometimes wonder if the media make this entire thing ten times worse.
The government should say "worried about loosing your money, treat yourself to that brand new car as security"
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Rattle - I'm selling a 2001 Punto with full SH, 12m MOT and 5m Tax, 79k in very good condition for much less. Two buyers keen already, so if you can match £900 its yours. But during the crunch are we becoming polarised - the have's and have nots? Those in good, stable jobs with no fears can afford to go and spend a little and grab a bargin. One or two cars on 57plates I've tried to contact in autotrader - now found dealers gone bust - all over country. My local Renault dealer has gone to the wall. Week before talking to sales staff stating they are busy - but when it comes to getting credit customers being refused - not in job long enough, don't earn enough for repayments, or past history not squeeky clean.
Bargins I fear only for those with solid cash to spend.
Punto - going....going.....
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A chill swept through the motor industry yesterday as Fiat slashed its forecasts and scrapped its dividend in the face of plummeting sales and a sudden draining of cash at the end of the year.
Borrowings at Fiat, which this week said it planned to take a stake in Chrysler, have soared to ?5.4 billion (£5 billion) because of a build-up of unsold trucks and farm machinery in the final quarter.
We just cars - small ones but obviously they are much bigger
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How exactly the £2.3b rescue package will rescue car manufacturers?
Are they going to produce more cars when already people are not buying them?
Edited by movilogo on 28/01/2009 at 08:24
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How exactly the £2.3b rescue package will rescue car manufacturers?
I have no idea whatsoever what the effect of £2.3 billion would be, because I can't relate it to my own personal finances. 2.3 billion is just a number of incomprehensible magnitude to me.
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Does the situation suggest that most people buy cars on credit?
Put this into perspective for me because I'm not familiar with buying on credit. Give me an example of a typical credit transaction for buying a car. I want to be able to work out how long it would take to save up for the car if you saved the equivalent of the monthly repayments.
So ......... how much is borrowed, how long is the repayment period, and what would be the monthly repayments?
And no, I'm not rich, just old fashioned ~ if I can't save up for it I don't buy it.
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I read yesterday that 75% of cars in recent years were purchased using some form of credit !!!
MVP
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"Rattle - I'm selling a 2001 Punto"
Sold - as seen?
;-)
Incidentally - our 2002 Punto doesn`t have a speck of rust - even stone chips on the bonnet don`t rust due to the galvanising.
Looks like a good deal - plenty of cheap parts and replacement panels /doors/bumpers and so on in breakers - in case of a knock or two.
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The funny thing about buying on credit, is that the 'advantage' of instant gratification only works the first time.
If, instead of buying on credit, you saved up beforehand to buy, it would (for arguments' sake) take you 3 years: you save up the equivalent of monthly repayments in advance then pay cash - but without interest added of course (..in fact you earn interest).
When you buy on credit you get the new car buzz 3 years earlier, but effectively spend the next 3 years paying for that - just the same as saving up in advance & paying cash really - but with interest payment added of course.
So, you 'save' the waiting time of the initial purchase, but are then forever paying interest - instead of earning it with the 'saving up' method - all for the one & only 'advantage' of getting the 1st new car earlier (you can subsitute 2nd hand car of course in the above examples - same principle though)
It's a mug's game - but more than that, when the credit dries up - the whole economy collapses - mostly because people get locked into the cycle of credit/default & have no real cash money of their own.
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woodbines, that's exactly what I did ~ saved up for my first new car.
It was a small and basic car with a puny 875 cc engine, bought when I was 27 in 1965. Since then all I've had to do is save up the cost to change for every subsequent car, earning interest on the money in the intervening years. I've always resisted the temptation of buying anything on credit (except for a mortgage) and hence couldn't afford my first new car until the relatively late age of 27. I started modestly and gradually worked my way up until I was happy with the level of car I've got now.
I'd still like to know how long it would take to save up the equivalent of the monthly repayments in order to pay cash compared with how long it would take to pay off a loan.
Edited by L'escargot on 28/01/2009 at 12:16
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L'escargot: one example...
£10,000 spent on a car (ignore trade in)
To save £10k from scratch over 4 years requires saving approx. £200 a month with interest at 2%.
To have a loan for £10k over 4 years is £246 a month at 8.9% APR (a fair rate for today).
So, over 4 years the loan is costing someone an extra £2208!! Ouch!!
However, not having the loan would mean making do with old bangers (possibly) until you've saved the cash, and how much would be spent on buying and repairing old bangers over 4 years?
OTOH, if you have a good reliable car already, then it seems a very simple equation, save up - don't loan...
Edited by TheOilBurner on 28/01/2009 at 13:45
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So over 4 years the loan is costing someone an extra £2208!! Ouch!!
Thanks, TheOilBurner, you've answered my question.
So ......... saving up £246 per month and then paying cash takes (approximately) only 39 months, compared to repayments taking 48 months.
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That's about the size of it. Of course, if you shop around you can do better than 2% interest, which really starts to make loans look like the worst kind of folly for a depreciating asset like a car.
That said, I'm in the loan trap myself. I don't like it mind, and I'm hoping to be in a better position next time. Half the problem is setting a realistic budget and sticking to it, especially when loans are so easy to get and open up the market to much newer cars then you might otherwise afford.
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And no I'm not rich just old fashioned ~ if I can't save up for it I don't buy it.
You and me both. And probably many more of our generation. House exepted (paid for).
Edited by Old Navy on 28/01/2009 at 12:06
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Me too. Never had a car loan or any other kind of loan in my life except a mortgage. If I haven't got the money to pay for something I don't buy it. Might not always have been the cleverest policy but it sure as heck feels like it is now.
My dad gave me what turned out to be very good advice from the day I earned my first pay packet and I have stuck religiously to this rule ever since. He told me to put 10% of whatever I had earned straight into a "rainy day" fund no matter how little or much that represented. I still do it now. Over the years this built up to a sum which represented a year's net income. I now never let the fund fall below an equivalent modern sum. Anything I have over and above that is fun money. Resultantly if I have no income for 12 months I can survive and in the meanwhile I can spend my fun fund without guilt.
Works for me.
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He told me to put 10% of whatever I had earned straight into a "rainy day" fund no matter how little or much that represented.
I applied the same principle to my mortgage repayments. I chose my first property (a modest maisonette) on the basis that the mortgage repayments were an affordable 15% of my gross salary. Whenever my salary went up I increased my mortgage repayments proportionally.
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When I was saving up for my first new car I arranged to live within cycling distance of my job. And when I changed jobs I made sure my new job was within cycling distance of my abode. I cut my coat according to my cloth.
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Glad to know I'm not completely on my own.
I waited until the ripe old age of 35 before buying my first new car for cash, and paid no more than £350 for the cars that I had owned before that.
Values have changed considerably - that's for certain.
Clk Sec
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yes L'escargot - once you've got through the 'difficult' first 3-4 years (of not having the sparkly new car & driving a modest 2ndhand job instead..) you're effectively just paying the same, i.e. saving-up in advance as someone who is always on credit - but you're always earning interest while they're always paying interest!
It seems almost 'dishonest' ! ;)
After a bike loan 30-odd years ago, I realised how daft it was getting a loan, when with a little forebearance & thrift I could pay cash & realise the benefit of the accruing interest for myself. Now, like youself, I save up in the intervening period & have the cash to spend on the new (or 2nd hand!) car when I want it.
Paying cash also seems makes you (in my case anyway..) a bit more, well, 'hard' about the decision & whole buying process. If you're not bowing & scraping to get a loan, the psychological 'boot' seems to be on the other foot when choosing/negotiating with a car dealer - if they don't come up with the deal, you can just go to one who can.
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i'm not a big fan of credit, but have used it in the past.
the comments above about saving up for a car and not buying one on credit are missing some element of the point
if you need reliability (e.g. for a job), security (e.g. carrying around a baby/child), particular vehilce (e.g. van for work) then you might have to decide that buying one early on credit is a sensible option
for example, some 20 years ago, my only car was becoming well expensive to maintain. My house at the time was in negative equity and i'd become single again, having to pay off an ex to keep the mortgage endowments as mine. My day to day cashflow was dreadful, i'd used up the savings to pay the ex and having looked at the previous 18 months of bills on my old car i worked out that buying a much newer car on 'tick' would be financially sensible.
cheaper fuel costs (change from early 20's to mid to late 30's mpg for a 12,000 miles p.a. user), no irregular maintenance costs (9 month old car) etc only cost me an extra £50 per month out of my pocket, which at the time was well worth it...particularly as I had friends/family 230 miles away and a reliable car meant the difference between visiting and not bothering.
I'd agree that huge great credit payments for something just because you want to look good or fancy the newer model isn't at all sensible.
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"couldn't afford my first new car until the relatively late age of 27."
"I waited until the ripe old age of 35 before buying my first new car for cash"
Blimey, I must be a late starter - my first new car was when I was 55. And that was only because I took advantage of interest free credit offer from Citroen. Figured it would be good to have a newish car when I retired. As it was, they had another interest free offer 3 years later and with what I sold my "old car" (3 years old - still the newest car I had ever owned!) for and the new price I just continued the payments. 2 years later I had paid it off. I guess interest free means you can save for a car and have it early without losing too much - well, except for interest on the saving bit. That "loss of interest " was probably covered by the 10% better fuel economy of the new car (maybe?)
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Just to get things into a bit of perspective, has the "credit crunch" or recession had any great significant effect on any Backroomer? The only thing we've noticed is rising prices of petrol, domestic fuel and food. We've started to economise on heating oil, and we shop around more to get the best price for food instead of just getting everything at one store. But that's about it, really.
Edited by L'escargot on 31/01/2009 at 15:18
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My business and therefore income has halved in the past twelve months. 30% of my customer base have gone bust in the past year and a significant number of those who remain are uninsurable for credit for my orders. Several of those are teetering on the brink of insolvency.I have traded through all the pevious downturns of the last 30 years but I have never seen anything like this.
I have never had so many bad debtors and those include businesses which I would as recently as 18 months ago have regarded as copper bottomed.
Exchange rate pressure is forcing prices up and the market is forcing them down. Quite frankly, we won't have a viable business ourselves for much longer if these trends continue.
So, yes in answer to the question, quite significant.
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Wishing you well, Humph...
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"Just to get things into a bit of perspective, has the "credit crunch" or recession had any great significant effect on any Backroomer"
Goodness L'Escargot, do you think the media is making it up? Didn't you hear, Lehman Brothers and Woolworth's went bust, along with a host of other well known names.
I'm glad that Humph has responded with his experiences, although I feel sorry for his and the other businesses which are suffering. There are a lot of folk who are still in their comfortable bubble at the moment, and have no inkling of the effect the crunch is having on businesses (and therefore ultimately most people). I'd conceded that the Backroom's clientèle appears to consist largely of people who have not yet been impacted, and I don't want to become one of the harbingers of doom, but it really doesn't look very good out there...
Edited by smokie on 31/01/2009 at 16:21
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Acquisitive crime rate is rising steadily after years of going down, we're (sadly) busier than ever.
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Im not aware of anyone personally who has been affected as yet. Ive heard of people in retail having issues and of course banking etc, but it seems to be in certain sectors at the moment.
My business is very strong, helped by my customers being middle to upper management in the main along with many company owners. Im sure this is the reason Im not feeling it as yet - if your customers are Joe public as it were, I would be very worried, but mine have alot more to fall back on that your average folk.
I have alot of retired folk ( albeit wealthy ones )on the books, not sure how they will be affected yet - they are certainly spending strongly at the moment and talking to them, few are doing anything different.
My mum works in public transport and is the only person in the company who can do what she does - that certainly helps avoiding the cutting block.
My sister is in property rentals and she said business is exceptional, best she has ever known it although rents are going down, demand is excellent - over-supply of properties is behind lower rents.
Im just waiting for the ensuing chaos - we grow all our own veg and have enough food to last 6 months frozen away - lets hope we dont need it!
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Lots of people affected.
One local solicitors firm have lost a partner and have anumber of admin staff going through the process of redundancy.
I know quite a few people who have suddenly gone from totally safe/secure to being worried about their jobs.
Lots of closed up shops.
Where do people live if they havent seen any sign of this?
And things will get much worse. As peoples customers go bust the bad debt will crystalise through the supply chain and things will go from being a little overdue to never going to be paid. Too many people assuming that things will work out.
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I think working for cash certainly helps me retain my cashflow, never give credit, never need to. I think giving credit is a crazy business approach - if they got the money, they should be able to pay at point of purchase.
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thats fine for very small businesses (except that it means you are very vulnerable to cutbacks - people feel cash) but isnt really an option for larger scale outfits or business to business stuff.
If I demanded cash payment from Siemens or Barclays or the NHS I wouldnt get very far.
As an aside, I've just seen this refered to on another forum
These are charts showing the level of borrowing from the US treasury -
seekingalpha.com/article/115525-the-scariest-chart...r
Note the different scales.
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"One local solicitors firm have lost a partner and have a number of admin staff going through the process of redundancy"
This is the first time ever I've come across this in 30 years in the Business, we stuck to our core business through thick and thin (i.e. crime)
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I had no idea that it was so unusual. I dont generally have much to do with solicitors.
I only know because one of my neighbours is on the redundancy list and mentioned that one partner had gone and that a couple of others have reduced hours (I dont know how hours makes any difference - I guess it depends on the partnership agreement)
They're a general firm - lots of property and commercial.
Edited by adverse camber on 31/01/2009 at 18:59
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Nor me ! You don't really count the hours that you do - like yesterday 11 hour day won't get extra money (just a banging headache) - Last week in February will be a 60 to 70 hour week again no extra pay. Looking forward to being salaried in April, albeit on a short term contract.
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We broke one of our retirement rules today, went to shopping centres on a Saturday. We drove to Glasgow, (50 miles, having lived in Australia cures you of distance), visited two major shopping areas, city centre and suburb sheds. The car parks were packed, shopping centers buzzing, thousands of people carrying branded shopping bags, had to wait for my lunch, situation normal. Must remember to do this mid week in future. Hope you weather your storm L'escargot.
Edited by Old Navy on 31/01/2009 at 18:56
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...we stuck to our core business through thick and thin (i.e. crime)...
Large provincial firm near me recently shut its property department with about 40 job losses.
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We do very little property work now - just the odd bit for friends and long standing clients.
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The other thing this firm did is drop the traditional 'Smith, Jones and Smith' style to become 'SJS legal'.
When I saw that, I knew it would end in tears. :)
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...we stuck to our core business through thick and thin (i.e. crime)...
I'd never thought of PU in stripes and mask before...
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Only figuratively speaking ;-)
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Perhaps I could pick your brains PU? Such as best / most lucrative / least messy / lowest risk entry level crimes for beginners and so on. Just in case of the urgent need you understand......
;-)
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I think some of my customers think I am one........
:-(
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Just came across this.
www.edinburghnews.scotsman.com/latestnews/sales-ar...p
Not sure if I am allowed to make this referal, but it reflects what I saw in Glasgow today. Are things different daan sarf?
Edited by Old Navy on 31/01/2009 at 19:37
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One of my neighbours has just bought a brand new Jazz - talking to him earlier, he got a good discount but it was pretty busy in the showroom.
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Over 60% of jobs in Scotland are Governmnet or councils.
About 25% of Scots live on benefits.
So most Scots will be unaffected.
In Edinburgh the main industry is banking. RBS and Band of Scotland (HBOS) have got bust and are being propped up by taxpayers.
So in summary few Scots will be affected: until taxpayers can no longer afford to pay for them.
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madf - You are right of course, I am a Londoner who lives in Scotland by choice and yes the taxpayer pays my pension. Good value in my opinion. But are things busy in the southeast? I havent been down for a few months.
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Perhaps I could pick your brains PU? Such as best / most lucrative / least messy / lowest risk entry level crimes for beginners and so on. Just in case of the urgent need you understand......
Tip-never, ever admit to anything. The odds will be decidedly in your favour. (CPS have gotta keep their stats up!)
Father in Law is a builder who has never had to advertise in the 16 years I've known him. Always in demand. He's existing on small bitty jobs at the moment. (As opposed to the individual, expensive houses he usually builds)
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When you see "Linklaters: 270 London jobs to go"
www.thelawyer.com/cgi-bin/item.cgi?id=136509&d=477...8
or
Peter Jones says recession will hit Dragons Den
tinyurl.com/b6au38
It already has ( motoring link)
Theo Paphitis and Deborah Meaden suffered the BBC 2 show's first recession loss, with the collapse last week of green haulier JPM Logistics into administration
tinyurl.com/cut7z4
How has the current situation affected me ? My shares are worth a quarter of their value at the peak and half of what I bought them for a few years ago.
My pension should see me survive OK but I shudder to think of the impact on so many.
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Shares down 50%
Bank int received down 50%
Part time hours down 50%
BUT
I have a good wife, I keep well and have 3 x sons & 3 x grandchildren - money is less important than them.
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My business is very strong helped by my customers being middle to upper management in the main along with many company owners.... I have alot of retired folk ( albeit wealthy ones )on the books not sure how they will be affected yet - they are certainly spending strongly at the moment and talking to them few are doing anything different.
might explain why my in laws hotel in NW Scottish Highlands is ticking along nicely then. It's expensive and pitched at the upper end of the market... they were beginning to worry and when 2 staff left last year, didn't bother replacing them, expecting some difficult times
but to date: the last quarter of 2008 was one of their best yet and the bookings for 2009 are beginning to fly in... although they're not counting their chickens just yet.. and I don't blame them.
I wondered if the poor value of the Pound versus the Euro has meant some people changing their Continental holiday for one in Blighty?.. or is that too soon to have worked into the system
Edited by Westpig on 31/01/2009 at 21:33
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Just to get things into a bit of perspective has the "credit crunch" or recession had any great significant effect on any Backroomer?
Yes, i'm a Property Developer.
Sales completely evaporated. But the interest rate cut have saved our bacon, because we're finishing the units and renting them for 2 years. Building costs starting to drop as subbies' orders decline, and much harder to get credit for materials and the like.
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The guy who built my walls turned up yesterday to price a minor change - his quote per meter square were within a couple a couple of quid of what we paid ten years ago - he is good and was very much in demand at one time.
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