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PCP time bomb - daveyK_UK
Hi,
An old topic but a chat with a car salesman’s on Monday got me thinking.

He works for a Porsche dealer and they have been doing well post covid.

However, noticed a slight slowdown July and August but nothing unusual with it being holiday time.

However he tells me they are expecting a drastic slow down next year when more people renew mortgages or have rental increases and new PCP rates are too much especially on anything Porsche sell.

Internally they are already discussing lowering sales targets for next year and even staff levels, and likewise pushing heavily sales this September as he stated it will be the best September for a good few years,

With interest rate hikes and cost of living hikes (both of which I understand, it is what happens when governments print money and lower its value), do forum contributors only expect it to hit the top of the market and effect luxury makes such as Porsche and prestige makes such as Mercedes or will it have a knock on effect for the rest of the car market?
A good opportunity for the likes of Suzuki and Dacia to grow further?

I thought it was worth sharing, it’s certainly got me reconsidering my current plan to change cars this Autumn and maybe hold off until next summer.


PCP time bomb - daveyjp

A local main dealer has just demolished a pefectly good showroom which sold Ferraris, Astons and other top end brands.

They built a Ferrari showroom half a mile away so thought the demolition was becuse they had sold the site. I know they are suffering as a group as they have closed a couple of other showrooms for more run of the mill marques not far away, one of which will be redeveloped for a supermsrket.

I've not been past for a few weeks, but did so last week and noticed the old showrrom site isn't sold. It is being replaced by a brand new ahowroom for Astons and Rolls Royce! They know where the money is.

PCP time bomb - gordonbennet

Our problem in the UK was the staggering depreciation of new cars for decades prior to the recent pandemic and the worldwide reactions to it, we got used to used cars being cheap as chips helped by overproduction of new cars, reality has brought all that which was unique to Britain to a shuddering reality check with supply and demand for new cars sending new prices ever skywards keeping the merry go round spinning endlessly upwards.

I'm not sure that next year will seen any meaningful relief of new or used prices, no matter how overpriced even boring mundane cloned cars become there seems to be no let up in people ready to sign up to £hundreds a month for the latest car rental wheeze, maybe they've forgotten or were too young to live through decades of mortgae interest rates arounbd 7% even double that at times.

Makers got their fingers badly burned in the 2007/8 farcical downturn where massive stocks of nearly new defleets were sold off at rock bottom prices just to shift the things from stacked oout compounds before they rotted where they stood, they learned hard lessons and since then they've not produced more than they can sell.

Notice too how its only a few makes have championed decent warranty periods, with so many makers sticking to a measly 3 years yet despite proving they have no faith their cars will last beyond year 3 they still have endless customers waiting on months or even years delivery dates, its the ticking time bomb of wallet emptying component failure possibilities that keeps punters going back to sign up for yet more rental debt upon debt.

Edited by Xileno on 25/08/2023 at 08:35

PCP time bomb - alan1302

Notice too how its only a few makes have championed decent warranty periods, with so many makers sticking to a measly 3 years yet despite proving they have no faith their cars will last beyond year 3 they still have endless customers waiting on months or even years delivery dates, its the ticking time bomb of wallet emptying component failure possibilities that keeps punters going back to sign up for yet more rental debt upon debt.

It just shows they don't think they need to offer any more and still get sales in - each extra year they offer costs them money - if they can get away with less then it's better for them. If they have huge waiting lists then why offer a longer warranty?

PCP time bomb - SLO76
It’s the mainstream market that’ll feel the pinch the most in the next few years in my opinion. I looked up my banks loan rate today to give a monthly figure to an old customer of mine who is looking for a spot of car advice and the rate for borrowing £7,500 has shot up from 2.9% APR to 7.9%. God knows what rates dealers are charging now on their already overpriced stock.
PCP time bomb - groaver
It’s the mainstream market that’ll feel the pinch the most in the next few years in my opinion. I looked up my banks loan rate today to give a monthly figure to an old customer of mine who is looking for a spot of car advice and the rate for borrowing £7,500 has shot up from 2.9% APR to 7.9%. God knows what rates dealers are charging now on their already overpriced stock.

You made make think of Peat Road Motors with their finance "deals" on new Ladas, SL.

The APR was quite spectacular, if I recall correctly.

At least the cars were list price cheap.

Mind you, once you took their finance, that was pretty much you for its duration.

PCP time bomb - SLO76

“ You made make think of Peat Road Motors with their finance "deals" on new Ladas, SL.” Brings back memories that. We took over the Proton franchise in 1996 when the local Lada and Proton dealer went belly up - figured it would be a good fit with the Mitsubishi franchise as a cheaper offering to sit under them. We sold loads of used Proton triple valves and MPI’s to Lada owners, taking in all sorts of Russian rubbish in part exchange. Every few months we’d get a call from a group of Russian guys who worked on a cargo ship looking for old Lada’s, though they didn’t want the Samara. They’d take one away if you had a Riva or Niva or two for them. So all old Lada’s went homewards again to where they belong.

[blocked word put back in - Mod]

Edited by Xileno on 25/08/2023 at 08:36

PCP time bomb - Lee Power
“ You made make think of Peat Road Motors with their finance "deals" on new Ladas, SL.” Brings back memories that. We took over the Proton franchise in 1996 when the local Lada and Proton dealer went belly up - figured it would be a good fit with the Mitsubishi franchise as a cheaper offering to sit under them. We sold loads of used Proton triple valves and MPI’s to Lada owners, taking in all sorts of Russian r****** in part exchange. Every few months we’d get a call from a group of Russian guys who worked on a cargo ship looking for old Lada’s, though they didn’t want the Samara. They’d take one away if you had a Riva or Niva or two for them. So all old Lada’s went homewards again to where they belong.

You might find this classic Top Gear Quentin Wilson piece about Lada exports interesting.

youtu.be/a9SdzX44zgY?si=6pC6KKsLieVxdBX2

PCP time bomb - groaver
“ You made make think of Peat Road Motors with their finance "deals" on new Ladas, SL.” Brings back memories that. We took over the Proton franchise in 1996 when the local Lada and Proton dealer went belly up - figured it would be a good fit with the Mitsubishi franchise as a cheaper offering to sit under them. We sold loads of used Proton triple valves and MPI’s to Lada owners, taking in all sorts of Russian r****** in part exchange. Every few months we’d get a call from a group of Russian guys who worked on a cargo ship looking for old Lada’s, though they didn’t want the Samara. They’d take one away if you had a Riva or Niva or two for them. So all old Lada’s went homewards again to where they belong.

I worked in a Suzuki showroom when PRM were around.

Someone would drive in with a Lada with a Peat Road Motors sticker on the window/number plates and we sales folk would all run and hide!

Edited by groaver on 25/08/2023 at 08:21

PCP time bomb - expat

Here is a link to a Peat Road Motors advert from back in the day

www.hiddenglasgow.com/forums/viewtopic.php?t=11493...5

PCP time bomb - groaver

Here is a link to a Peat Road Motors advert from back in the day

www.hiddenglasgow.com/forums/viewtopic.php?t=11493...5

That's great!

I see that they were offering 0% interest rates.

The cars they offered at that rate had "added value" included in the price.

When you bought a Lada from them, you generally kept it to virtually the end of the finance term.

You were most certainly not trading in after 12 months having realized that car wasn't quite the new car that you hoped it was going to be.

PCP time bomb - Adampr

Here is a link to a Peat Road Motors advert from back in the day

www.hiddenglasgow.com/forums/viewtopic.php?t=11493...5

Amazing anyone ever bought a Nova at those prices.

PCP time bomb - Xileno

One post edited and another deleted that makes no sense after the edit.

Can we try and keep contentious issues out of the Motoring forum for the benefit of all.

Thanks

Mods

PCP time bomb - Adampr

PCP is a bit of a scam anyway, so they will find a way to keep it up. A lot of buyers walk in thinking only about how much it will cost them per month. In their mind, they have already put down the value of any PX as just reducing monthly payments and they don't give a moment's thought to the balloon payment (why would you if you're never going to pay it).

That gives the finance firm two variables that the purchaser doesn't care about, plus the ability to vary the term of the finance. That's on top of any deposit contribution they want to use to offset higher interest rates.

Ultimately, they will find a way to make the monthly payments the same, and the punters will be happy.

PCP time bomb - SLO76
I remember going to a meeting with our main finance company back in the 90’s when PCP was first being touted. I was against it, I believed that you’d see a surge in sales with the lower monthly payment and then a sharp drop when the market became saturated with people with zero equity on their cars. The old school way was to buy it on finance, pay it off then run it a while or trade it in using the full value remaining as your deposit. People being as they are live week to week and rarely save much of at all so I expected it to become an issue getting deposit money out of them for another motor.

How wrong was I? PCP became the norm and prices surged upwards to push that monthly payment back up again to a level that was previously occupied by a full conventional finance agreement. People had a deadline at the end of their PCP to come up with many thousands of pounds to buy it or take another on a low deposit agreement. Thus the never-ending car payment madness began.

Manufacturing and dealers tailor deals and daft list prices towards pushing people onto these forever PCP deals, meaning almost no one actually owns their car from new. Finding a well cared for used car with full dealer history which hasn’t been clocked or had cheapo paint repairs is more difficult now than I ever remember and that’s all thanks to the PCP agreement.
PCP time bomb - Terry W

Those with a car on PCP will likely want a car at the end of their existing contract. They have two choices - buy the car, or replace (probably) with another on PCP or lease.

"Buy" seems unlikely - the high prices paid for new cars during Covid was, I assume, reflected in the monthly payments and end of contract price.

The end of the pandemic, has left a long tail of supply constraints but increased vehicle supply and a recession will tend to stabilise or even drive prices down. There are a lot more discounts around today than 6 months ago!

So I suspect that generally there will be a tendency for folk to "trade down" when replacing their cars. This may only impact a small percentage of folk as many:

  • will be unaffected by rising interest rates (or even benefit with savings)
  • drivers of premium motors may be unconcerned by a few hundred ££ pm
  • there is fairly full employment - not all have cost of living or job security concerns

In many ways the popularity of PCP and lease deals in the UK has the effect of stabilising demand - the alternative model where new cars are largely owned means that folk could more easily defer a change with immediate impact on market demand.

PCP time bomb - groaver

Interesting thread for me.

We have just taken delivery of a new car today (CX-5) which we decided to take on a personal lease for the first time.

We worked out that it would have cost us £20k more to purchase outright than the total cost to lease it for three years.

We realise that we won't have any vehicle to p/x at the end of it but have put the monies we didn't have to outlay into a fixed rate ISA to earn some interest over the period.

Our old car was sold to AC and makes up around 63% of the the total lease payments.

We factored in the fact that our old car was going to depreciate over those three years to a degree as well.

We now don't have to think what to do with a petrol-engined crossover in three years time, as well.

YVMV.

PCP time bomb - fray bentos

I Don't bother with pcps. My current car was bought at 2 years old 4 years ago for £10,000 after a £1000 haggle discount with 3 years warranty. My latest wbac quote was £10250! I am quids in as they used to say. Unfortunately this years road fund licence has gone up to £35, I think I can handle that!

The maybe £300 a month pcp payment for a new car I could be paying is getting 4.81% in my local building society. Have I missed something?

PCP time bomb - Big John

I Don't bother with pcps. My current car was bought at 2 years old 4 years ago for £10,000 after a £1000 haggle discount with 3 years warranty.

It's generally what I/we do. Bought my Skoda Superb in 2015 at 14 months old £10,800 and I found a 2016 Skoda Octavia for my son in 2019 £7800. All still going strong.

However recently with a new car shortage used prices have been bonkers, as you say we could still get the same back on the latter car now! - who knows what next????? I suppose there are some slight signs things are changing again as some manufacturers have brought back 0% interest deals.

PCP time bomb - SLO76
Leasing often works out cheaper for tax reasons and because large leasing firms can buy much more cheaply than we as individuals can. The last new car I took on was a 2014 Honda CRV and even with a meaningful discount it was cheaper to lease it over 4yrs than to buy outright or via PCP. The only failing was that again for tax reasons we couldn’t directly buy it at the end as you could with a PCP. I could’ve had another party but it on my behalf, but that would add complication and another name to the logbook. I’ve since then only bought used cars and here PCP’s are rarely competitive compared to traditional loans, they’re almost always higher interest.
PCP time bomb - daveyK_UK
7.9% manufacturers finance when I last looked, I can get a loan for 6% apr.

That is a significant saving over 3/4 years.

On the topic of the UKs addiction to PCPs, I have noticed a few new 72 and 23 plate cars in our neighbourhood and the majority are smaller than the previous cars they owned.

For example, family on our street have gone from a Qashqai to a Juke, a young couple we know have gone from a Kuga to a Puma, the guy on the corner has gone from a 5 series to a A class.

Are people downgrading the size of car to avoid higher PCP costs?


The reason why I’m hesitant to buy a new car right now is the value question , which I accept is a different topic.
List prices are considerably higher, with less discount available.
Sadly the pound in my pocket is worth less due to government money printing.
But despite the economic reality, new cars do not represent good value compared to what I can buy elsewhere in the economy for the same quantity of pounds.

This is my personal issue, if I don’t want a Dacia (which are not as cheap or as budget as they used to be), what represents value?
There is no value, or maybe I am in the minority and too interested in the economics of cars and should just forget it and enjoy the nice shiny plastics and pay the going rate?

Edited by daveyK_UK on 27/08/2023 at 08:51

PCP time bomb - Adampr
7.9% manufacturers finance when I last looked, I can get a loan for 6% apr. That is a significant saving over 3/4 years. On the topic of the UKs addiction to PCPs, I have noticed a few new 72 and 23 plate cars in our neighbourhood and the majority are smaller than the previous cars they owned. For example, family on our street have gone from a Qashqai to a Juke, a young couple we know have gone from a Kuga to a Puma, the guy on the corner has gone from a 5 series to a A class. Are people downgrading the size of car to avoid higher PCP costs? The reason why I’m hesitant to buy a new car right now is the value question , which I accept is a different topic. List prices are considerably higher, with less discount available. Sadly the pound in my pocket is worth less due to government money printing. But despite the economic reality, new cars do not represent good value compared to what I can buy elsewhere in the economy for the same quantity of pounds. This is my personal issue, if I don’t want a Dacia (which are not as cheap or as budget as they used to be), what represents value? There is no value, or maybe I am in the minority and too interested in the economics of cars and should just forget it and enjoy the nice shiny plastics and pay the going rate?

I find the psychology of PCP fascinating. You tell someone that they can have an average car for £5,000 deposit and £300 a month over 48 months and they think it's a good deal. That's nearly £20k and you have nothing at all at the end.

It's a terrible deal, but people still go for it. I can do the maths above, say it's a terrible deal and 20 minutes later look at all the 'deals' available and start day-dreaming about a new toy. Utter madness.

PCP time bomb - Terry W

£30k for a new motor is more than most folk have easy or unconcerned access to.

£300 per month is easily related to whatever monthly income they enjoy. In context £300 is an unremarkable meal for two once a week, two tickets to a "premium" event (concert, sporting) once a month, a very average 2 night weekend UK hotel break.

That it is an expensive way to deliver personal transport either doesn't figure in their thought processes, or they simply like shiny bits of obvious status.

PCP time bomb - movilogo

That's nearly £20k and you have nothing at all at the end.

Same can be said for renting as well. Those who can't afford to buy a house their only option is to rent.

Those who can't pay upfront to buy a car, can only avail the car via monthly payment.

Even for cash buyers PCP is worth going as manufactures often do a deposit contribution, meaning the total cost of car goes down and one can always settle the figure after a month or two - thus not paying interest and actually owning the car.

PCP time bomb - barney100

I'm hanging on to my old girl 'til she breaks and hope the prices drop a bit.

PCP time bomb - Big John

I'm hanging on to my old girl 'til she breaks and hope the prices drop a bit.

Seconded...

PCP time bomb - davecooper

Out of six cars I have had on PCP, four were at 0% APR and that was on top of a dealer contribution and generous trade in value for the previous car. No brainer really. Current car, £28000 new 3 years ago, £257 pm over 3 years on PCP.

However, my PCP journey is about to come to an end. New car prices and APR's are too high now so will be buying my current car at the end of the lease period and hanging on to it for a while. It will be a bit of a bargain as the settlement sum is around five grand less than the private sale value at the moment.

PCP time bomb - Falkirk Bairn

A son took out a PCP in 2015 - £33K list, BMW discount £2K, Finance Discount £2K, APR was roughly 4%. £420 per month

He bought it at the end of the 4 years for £14K. -

PCP costs + £14K to buy = £34k

WBAC offering £14,800 for his car a few days ago

In round figures depreciation = £200 per month!

I bought my CRV for £20K in 2012, sold it a week ago £9,000

£11,000 depreciation in 11 years = £83 per month - CHEAP motoring!

The only problem is that my new car list price was over £40K!

PCP time bomb - movilogo

The mortgage time bomb will explode with a lot bigger damage compared to PCP time bomb.

At least PCP payments are low and fixed for the duration. But everyone needs a place to live.

PCP time bomb - skidpan

one can always settle the figure after a month or two - thus not paying interest and actually owning the car.

Done this several times in the past and will do it again when we get the next car. To avoid paying charges you have to settle up within 28 days and even if you settle up after say for example a week you still have to pay a weeks interest.

Still very much worth doing.

PCP time bomb - pd

You're unlikely to see these sort of depreciation figures with cars being worth the same as they were 3 years ago again.

Slowly but surely the market is returning to normal with depreciation resuming.

PCP time bomb - Andrew-T

You're unlikely to see these sort of depreciation figures with cars being worth the same as they were 3 years ago again. Slowly but surely the market is returning to normal with depreciation resuming.

Meanwhile list prices have escalated to make up for it !

PCP time bomb - Oli rag

Just read a comparison test of a vw Id3 and an mg4. They gave the pcp costs over 3 years with a £5000 deposit on each.

The vw cost was 36 x £555 (£19980) + £5000 deposit = £24980!
The mg cost was 36 x £454 (£16344) + £5000 deposit = £21344!

I think the world has gone crazy when it’s seen to be the norm to “rent” a new car for 3 years then hand it back and start again for “only” 21k to 25k!

If you’ve signed up to this then happen to lose your job, or the mortgage rate shoots up, you can’t even sell it or hand it back if you are struggling. Crazy!

PCP time bomb - Bromptonaut

Just read a comparison test of a vw Id3 and an mg4. They gave the pcp costs over 3 years with a £5000 deposit on each.

The vw cost was 36 x £555 (£19980) + £5000 deposit = £24980!
The mg cost was 36 x £454 (£16344) + £5000 deposit = £21344!

What are the list/OTR prices those quotes are based on?

And what is the balloon payment to keep the car in each case?

PCP time bomb - Oli rag

Just read a comparison test of a vw Id3 and an mg4. They gave the pcp costs over 3 years with a £5000 deposit on each.

The vw cost was 36 x £555 (£19980) + £5000 deposit = £24980!
The mg cost was 36 x £454 (£16344) + £5000 deposit = £21344!

What are the list/OTR prices those quotes are based on?

And what is the balloon payment to keep the car in each case?

The VW OTR price is £42870 with a balloon payment of £19340

The MG OTR is £32495 with a balloon of £17055

Edited by Oli rag on 29/08/2023 at 11:02