The perfect storm It’s coming

[ADC]

As per my initial comment!!

Mainly stating the bleeding obvious…

Ah... but when you read every third word on every second line, suddenly the real message becomes clear. Wake up sheeple.

 

[1stczechemira]

What if the supply / production chain issue exist to ensure prices remains inflated and thus saving auto makers from “owning” the risks of returned PCPs? It’s a long shot but it’s a possibility….

Manufacturers in the time of covid understood that it is better to produce a smaller amount of goods with a larger margin than to constantly oversupply the market and sell at discounts.

A perfect example is our (Czech/German) Skoda Auto, they produce a few tens of percent less cars than before 2020 and make more profit than they used to.

 

[Mctaff]

For record, I think the earth is roundish….

I think this one needs it’s own thread

 

[Tonyshepp]

Surely the whole point of a PCP is to offer protection to the consumer. As long as you've paid at least half of the agreed loan back then you can just hand the car back at any time.

That's Hire Purchase where you can terminate after 50% of payments, I don't think you can terminate PCP early without paying off the remaining balance in full.

 

[ADC]

Being less of a sarcastic ass about it, isn't this (one of the reasons) why gap insurance exists?

 

[SuperBusa]

A car dealer I was speaking to was saying he had this happen recently, but still very unusual to have happen. Further down the line maybe, but currently new cars are hard to get, so prices staying high.

 

[Mctaff]

Being less of a sarcastic ass about it, isn't this (one of the reasons) why gap insurance exists?

That’s only if you wrote the car off though not if you default on payments?

 

[Dommo]

That's Hire Purchase where you can terminate after 50% of payments, I don't think you can terminate PCP early without paying off the remaining balance in full.

Anyone can terminate their PCP contract after 50% of the total amount payable has been paid. This is referred to as voluntary termination, which is a legal right covered under Section 99 of the Consumer Credit Act 1974.

 

[ADC]

That’s only if you wrote the car off though not if you default on payments?

Of course. derp moment. so his next article will be a surprised reaction to the sharp rise in "accidents" resulting in write-off?

 

[Mctaff]

Anyone can terminate their PCP contract after 50% of the total amount payable has been paid. This is referred to as voluntary termination, which is a legal right covered under Section 99 of the Consumer Credit Act 1974.

Sure, but aren’t you pretty much at the end of the term by then?

Emira finance… 50% is c49k paid/remaining, balloon 46k, so you’re almost done when you’ve paid 49k off

 

[Mctaff]

Of course. derp moment. so his next article will be a surprised reaction to the sharp rise in "accidents" resulting in write-off?

I mean it is icy after all…. I just lost control of the vehicle

 

[Dommo]

Sure, but aren’t you pretty much at the end of the term by then?

Emira finance… 50% is c49k paid/remaining, balloon 46k, so you’re almost done when you’ve paid 49k off

Exactly this! My point was more relating to others that were suggesting there's a PCP time bomb! As long as people pay their monthly's on the PCP until either the contract ends or they pay 50% of the loan off, then they are totally secure from any fluctuation in the valuation of the vehicle.

 

[Jonhklee]

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Ft

 

[TomE]

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Article is behind a paywall.

 

[Dommo]

Article is behind a paywall.

Just google Financial Times PCP and it lets you read it. It did for me anyway!

 

[Dommo]

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Read it but it just states the obvious.

The article even points out that you can hand the car back once 50% is paid.

The only issue people will have is that they may not have equity in the vehicle to take out another new car PCP at the end of the term, and that the interest rates on newer PCP's will be higher making them less affordable. They'll just have to keep the car longer and re-finance the balance, which even with an increased APR should still be much less than their original monthly payments as the loan will be for half (or less than half) of the value of the original loan.

 

[Mctaff]

Latest Motor Finance Statistics

www.fla.org.uk

 

[DerTheDer]

Phew, glad all my vehicles are PAID OFF!

 

[Mctaff]

No one likes a show off!!

 

[GetawayDriving]

How many people are willing to absolutely destroy their credit to upgrade into a new car? People who are underwater on cars will just keep them until they are paid off. If they don’t fit their life, they will adapt. I would guess the vast majority of these cars are CUVs or SUVs, which are kind of designed to fit anyone’s life. Nobody is going to buy a 2nd car with the intent to just stop paying for the first. There is no automotive need that dire, short of a car dying completely out of warranty to the extent the person can’t afford to fix it. But what are the odds of that on a car new enough to be under lien?

Sure, plenty of people will struggle in down economy and some may not be able to pay that overpriced payment. Repossessions will likely continue to rise as the economy cools. but that’s also the intent of raised rates, cool the economy and lower inflation.