In the last few weeks I have been around looking at lots of dealers forecourts.I think there is going to be a crash in the car market soon on secondhand values.

Nearly every garage, visited is full of couple or three year old second hand cars like overflowing full!

This is the remaining stock from the big March plate change and the usual trickle of others since.

Now we are shortly coming to the next plate change and order books are right up there, so there will be even more cars flooding the already overcrowded forecourts!

The advent of the PCP has created a massive supply of new vehicles, something like 74% of new sales are PCP.

Second hand ownership is dropping, due to so many new cars on PCP's.

I have never seen so many people driving brand new cars ever! Where years ago they were buying a majority of the used vehicles, new car ownership is becoming almost compulsory just like home ownership is seen as the only thing to do.

Most people buying on PCP have no intention of long term ownership as a majority see it as the cheapest way to get into a "hassle free" car for a few years and at the end just use any money above the GMFV as a deposit on the next.

I think this wobble will have the finance companies struggling to set GMFV once the flood of cars hits saturation levels.

I saw a similar thing in Spain over a number of years, when I lived there, with every Spanish/British/German builder, building on every conceivable piece of land and eventually they were building and having to leave them part built or completely empty as the had over supplied the market and causing a massive glut of new builds.

Banks, Investors, Lenders & Hedge Funds operate in mysterious ways with peoples Pension Funds, 

and while we predict a crash in the second hand car market they predict making a killing, or they predict a crash where they will make a killing.

So something is going on, but the car Manufacturers are also Financial Institutions and they make money on new cars, 

money lending, and then more as they finance the Dealerships that lend on used cars as well.

http://news.sky.com/story/1445054/city-investors-swoop-for-a-1-2bn-car-dealer-bca

http://www.british-car-auctions.co.uk/Services/BCA-Partner-Finance

 

http://en.wikipedia.org/wiki/Arnold_Clark

Well something will have to give soon, as surely it will get to a point where the market will be so saturated of nearly new cars (3 years and under) that the balloon figures (which PCP relies on) will crash. Meaning that people who are relying on some 'equity' to put towards a new car at the end of their term will be out of pocket!

Price of new cars has been pumped up.

Used prices are hardly cheap. Lots of metal sitting around.

 

Been like this for years I don't really expect it to chance.

 

A significant amount of people (maybe a majority) just aren't very good with money.

 

They just see a shiny thing whip out the credit card/sign on the line and deal with the consequences later.

Something like 74% of new sales are PCP.

 

One of the most incredibly irresponsible ideas of the past decade; low interest, easy purchase - why not incur some debt?

 

Borrow, spend and be merry for tomorrow we will all be Greeks.

I was thinking exactly the same thing recently. Yet another person I know, who would otherwise have got a used car, just got a new one on PCP. If everyone is doing this, who will be buying the barely used cars to keep the GFV prices high enough to make it viable?

For me, as a cash buyer of nearly new cars (up to 3 years) I think I'm likely to get some lovely bargains when it comes to replace one of ours.

Something like more than 75% of new cars bought are on Finance, but that is not PCP.

Most of those might be on PCP but you need to know how much of a percentage that 'most' might be.

http://which.co.uk/cars/choosing-a-car/buying-a-car/buying-vs-leasing

(Is it over 75% of all New cars bought on Finance, or over 75% of new ones bought at Dealerships on Finance?)

 

New types of Finance, but people have been buying on tick or renting for decades, 

Vacuum Cleaners, Sewing Machines, Fridge & Cookers, TV's, Motor Bikes, Cars, LGV's / HGV's, Agricultural Vehicles.

 

You either have Cash-Money or you borrow money or you hire / lease stuff.

Like you buy a Property, Borrow to Buy a Property or Rent Properties.

 

It is how the Country Runs and Financial Services makes money to invest in Industry & Commerce or not as the case might be.

There is still lots of activity in the used market, we regularly sell between 55-65 used cars a month from our dealership alone, cheapest car we stock is over £10k.

New cars we average around 80 units in a quiet month, to over 160 in a busy one, normally a 60-40 split finance wise, of the 40% "cash" buyers, most will have borrowed from there bank.

This Octavia is the first one where I've used manufacturer's finance, and the savings on 0% far outweighed any extra discount I might have got paying in full.

All the others where I've needed to borrow money it's been with a personal loan that was paid off in full after four years.

Which is why VAG are pushing leasing by offering better deals than PCP.  Locked in for the full term, and hefty penalties for excess mileage and damage.

Wow, did I misunderstand the title of this thread. 

 

I was going to respond with:

 

The M5, J21-22, 3 cars, next Weds afternoon...

I'll never buy new again.

Did it once on PCP but it meant I couldn't change car as often as I'd like.

 

Got the accord on a 3yr personal loan, haggled for a cheap 3yr warranty. Car will be covered for as long as I'm paying for it. I think that's the plan for me in future.

Also the car is always worth a little more than I paid for it so worst case ever happens I can dump the car and clear the loan.

 

I think a lot of new cars that are around are bought by people with small businesses, they can put the car through their accounts to save more than a private buyer.

Edited 18 July, 201510 yr by Aspman

I am not that sure on the figures given for cars purchased from dealers on Finance & PCP.

Smoke and Mirrors i think, and who actually buys and owns the cars on Lease.

 

The Biggest Fleet / Group buyer in the UK is Motability Finance (a Charity), 

but Motability Finance buy the vehicles outright, ie They Buy them with money,

& pay rather a lot for them, more than a private customer might, (worth seeing a Invoice as a Dealer presents it)

then lease them to the Customers,  then when the vehicle is returned at the end of the lease the vehicle goes to Auction

and the money is back to Motability, and there is plenty earning in Transport, Commission, then the Trade goes to make profits with these 'Used Vehicles'.  It keeps things going nicely in the Used Car Market, & Among Charity Employees and Contractors.

In some cases Motability Finance lend Money for Customers to Purchase Cars outright, But after the 5 Major banks got control of the Motability Finance's Funds (a Charity remember) they were not so keen to lend Customers so they could buy Used or New Cars as they had been able to in the past.

(that was after the bank crash in 2008, and £1.3 Billion of Motability Finance Funds was handy

for the 5 major banks showing on their balance sheets.)

 

http://www.british-car-auctions.co.uk/buy/Useful-information/Types-of-auction/Motability

 

 

Edited 21 July, 201510 yr by Jamie123

Could with a price crash over here - my car is near worthless any way so it trade/sale value is negligible compared to what id need to buy in terms of age etc to make it a worthwhile purchase - ie max age of 2009 for low road tax, but anything in budget of that age for me has mileage so high its not far off my current bus..

Cars already depreciate too rapidly as it is, making perfectly good cars uneconomical to repair too early in their lives.

A ten year and 120000 mile lifespan is pretty conservative for a new car, so at three years old with 70% of it's use still to come, why do we accept that they are only worth a third of what we paid?

 

By contrast, two wheeled transport has a much flatter depreciation curve - my 7 year old Vespa will still fetch half the new cost for example.

Maybe those us on the 2nd hand market are just more aware of what the vehicles are really worth - ie not caught up in the must have new car regardless of price, so mr dealer heres an extra 5k for absolutlely nothig other than alot of people want to buy this same car from you..

Cars already depreciate too rapidly as it is, making perfectly good cars uneconomical to repair too early in their lives.

A ten year and 120000 mile lifespan is pretty conservative for a new car, so at three years old with 70% of it's use still to come, why do we accept that they are only worth a third of what we paid?

 

By contrast, two wheeled transport has a much flatter depreciation curve - my 7 year old Vespa will still fetch half the new cost for example.

 

I dunno about 10yr these days. The sensors and electronics are making cars less economical to repair earlier and earlier.

It won't be a long time before cars are made unserviceable because the software on them is too far out of date.

Announced today that 2 of the biggest insurance companies in ireland - AXA and Aviva (my insurer) are now refusing to insure any vehicle 15yrs or older regardless of nct certification, on the grounds that -

they are more likely to be involved in a collision???!!

Kinda smells of bs, and if one company starts that kimd crap others will soon follow.

Announced today that 2 of the biggest insurance companies in ireland - AXA and Aviva (my insurer) are now refusing to insure any vehicle 15yrs or older regardless of nct certification, on the grounds that -

they are more likely to be involved in a collision???!!

Kinda smells of bs, and if one company starts that kimd crap others will soon follow.

 

I suspect that they *are* more likely to be involved in a collision, but not because they are old cars.

Because they are mostly cheap cars, they are likely to be bought by new drivers who crash more often.

Exactly.... for a long time aviva were actually the best value for new or younger drivers - when they were hibernian - doing the ignition course got you a 20% discount, and they offered fully comp at a lower experience range than competitors..