Car prices?

[Bigbaddog997]

Yet you could walk into Porsche and buy a £120k car on finance and all they really ask is can you afford it

I’ve never bought a car on finance from a dealer (although I did have a small bank loan in 2008) but do car dealers ask you if you can afford it? I was under the impression that the payments were set at a rate where the finance company wouldn’t lose out if you default and had the car repossessed. If you pass the credit checks it’s then a yes.

 

[T8]

I was going to buy a 54 plate 997 Carrera from William Francis back in late 2007, we agreed £32k, however, I ended up buying an M3 CSL instead from Romans, and for under £32k, those were the days ...........................

Thank you for indulging me in my pedantry and responding to my comments.

One last thing though. Above you make reference to a deal you nearly did in 2007. I like to keep my sad man notes up to date on these things and had already recorded you saying previously that this occurred in 2008.

2008 validates the other information I have relating to values at that time but 2007 does not. Can you recall when it actually was? Many thanks.

 

[gizlaroc]

It is seriously lax, I nearly set up a company for bespoke car finance, and yeah there is a credit check, but the fact someone who is working full time on £25k a year can buy a car with £800 a month payments says they are only making sure you have not defaulted on every credit agreement you have ever taken out.

What you do find is main dealers, who have in house finance (VWFS in the case of Porsche) will whack the rate up so high to try cover those who do default, or throw the keys back at the half way mark.

The reason I nearly set that company up was so many lenders still don't seem to understand how the market has changed for one, but more importantly so many people selling PCP type agreements simply didn't understand what they were selling.

As an example I remember going into BMW with my old man to buy an X5, £50k car, £10k down and then 48 x £760. This was 11.9% apr on a used car.
The salesman kept saying "We guarantee you car will be worth £18k at the end."

I was saying that I can get 4% apr from Lombard, if we pay that same amount for just 5 more payments the car is ours.

He kept saying "Yeah, but we guarantee you car will be worth £18k at the end."

"No, you are guaranteeing that if we want to keep that car, we will have to give you another £18k at the end to do so."

He lent back in his chair, looked up, gave out a massive blow of air as if to say his mind was blown, never looked at it like that before.

The fact these people are selling finance, and finance that is often more than someone took out a mortgage for, and they don't get what they are selling really is incredible.

People often pay stupidly high apr rates to get a balloon, or a Guaranteed Final Value as they like to term it, when the reality is they would be much better to just do it over 55 months instead of 48 months and own the car at the end.



Also, sometimes some of the finance contributions as hidden discounts, you would be a mug not to use finance, it can be far cheaper than using cash.
BMW and Mercedes have had some incredible deals on 7 series and S Classes over the years.

Just before lockdown BMW were offering incredible deals on the 5 series touring.
I was offered a 540i Touring for £359 a month with only £1049 down.
It was a £51000 car.
Dealer contribution of £10k, BMW finance contribution of £13k.
48 months at £359 and option to buy at the end of £12k.
It was only because of lockdown and the fact I had no idea if I would survive it that I didn't go for it. But incredible deal.

I think it was 2.9% apr. But they were basically giving you £23k discount. Easier to do it in finance contributions rather than discounts, which would have really pee'd off those who had just thought they had done well knocking 12% off as a cash buyer.



I'm not against finance, but I am against people being ripped off, people being taken for a ride with finance.
Always best to own your cars outright imho, but there are times that using finance is more sensible.

The finance packages have been set up to get people on the merry go round of finance, small increase every time you swap for a newer car, then you get to the point where your initial deposit has been decimated and if you want to go back to using cash you are buying a much, much older car. It is a clever design.

 

[gizlaroc]

Thank you for indulging me in my pedantry and responding to my comments.

One last thing though. Above you make reference to a deal you nearly did in 2007. I like to keep my sad man notes up to date on these things and had already recorded you saying previously that this occurred in 2008.

2008 validates the other information I have relating to values at that time but 2007 does not. Can you recall when it actually was? Many thanks.

When I get back I will have a look. I'm in Kefalonia at the mo, but I will dig it out, I think I have some emails on my office computer. I can see when I got the CSL at least. But you might be right.

I should add, this was not the norm, that car stood out as being incredible value for money at the time and also, only 30 minutes down the road from me. Normally all the bargains were in Inverness or Cornwall.

It was before the economy came tumbling down. Or before anyone was seriously reacting anyway.

From memory, I don't think that things started to get sticky economy wise, not properly anyway, until 2009.

I'm sure it was Feb 2010 when I bought a 4 year old A6 Quattro Avant, 3.2fsi car from Peterborough Audi for £13k, That was advertised for £23k. It was just madness at that point. They had 50 new cars coming in, half of which customers were wanting to cancel, and after a week of emails etc. They did the car for £13k.

I was at the NEC, saw this car at Audi Peterborough and for £13k. Looked a bargain. Sale of the century.
I drove over there on the way back to Norwich and when I got there it said £23k, advertised online at the wrong price. They said they would do it for a really good price, came back to me and it was no where near and I wasn't that fussed about it anyway. I said if you can do it for the £13k I will have it. They did. So I did.
It was actually a great car. I drove it for 2 years and 60k miles and sold it for £12k I think it was.
But this was when there were fields full of cars unsold.

But, and this is important, it didn't last long, people soon realised that they wanted to just get on with life and they did. We tend to bounce back quickly. It is human nature.

 

[Harryblue]

There is no doubt that inventive finance deals is a factor that has helped push up the amount of debt that people are willing to take on.

It's an interesting quandary, I suspect people will be upside down on all sorts of things, from property to Rolex watches, but if finance houses call it in then there is the very real danger that they will also go bust when people can't settle the debt or make the margin call, so I think they'll put their fingers in their ears and hope people can continue making the monthly payments. Otherwise it's 2008 all over again and this time quantitive easing will collapse the system rather than prop it up.

It's a different world today but in purely finance terms it's not too dissimilar to 2008, people upside down in debt and no way out, but this time no one is calling it, admitting it in public, or pushing it, I think the idea this time is to pretend it isn't happening, just ignore it and hope the tide comes back in sooner rather than later.

On the flip side if you're a cash buyer then the market isn't bad, it's the perfect storm for the 996 that was underpriced anyway, I've bought a couple of cars this year and if I had the room I'd probably stick another 996 C4S and a 996 GT3 away too, I think they'll be fairly solid buys at todays prices.

 

[Harryblue]

From memory, I don't think that things started to get sticky economy wise, not properly anyway, until 2009.

I'm sure it was Feb 2010 when I bought a 4 year old A6 Quattro Avant, 3.2fsi car from Peterborough Audi for £13k, That was advertised for £23k. It was just madness at that point. They had 50 new cars coming in, half of which customers were wanting to cancel, and after a week of emails etc. They did the car for £13k.

I was at the NEC, saw this car at Audi Peterborough and for £13k. Looked a bargain. Sale of the century.
I drove over there on the way back to Norwich and when I got there it said £23k, advertised online at the wrong price. They said they would do it for a really good price, came back to me and it was no where near and I wasn't that fussed about it anyway. I said if you can do it for the £13k I will have it. They did. So I did.

It was the same in most asset classes back then, that's when the Bank started QE and the ten year run started.
A decade later it happened again but much harder and faster at the start of covid, people were getting laid off and orders were being cancelled all over the place, the markets went off a cliff but by the end of the year it had flipped 180 as the banks printed money at record rates and everything was flying off the shelves, we've just had the craziest run on assets that the world has ever seen.

It didn't take a genius to see that it couldn't last and even though everyone has done their best for a soft landing it's still going to be messy.

 

[Bigbaddog997]

As an example I remember going into BMW with my old man to buy an X5, £50k car, £10k down and then 48 x £760. This was 11.9% apr on a used car.
The salesman kept saying "We guarantee you car will be worth £18k at the end."

I was saying that I can get 4% apr from Lombard, if we pay that same amount for just 5 more payments the car is ours.

He kept saying "Yeah, but we guarantee you car will be worth £18k at the end."

"No, you are guaranteeing that if we want to keep that car, we will have to give you another £18k at the end to do so."

I think this is an excellent example of why I’m seeing endless adverts and junk emails for finance mis-selling class action litigation. Thank you for sharing this story.
Regarding the economy I bought my first house in May 2008. I recall being at Twickenham later that year (November) and chatting with friends- we had probably lost 10 percent of the value of the house over that 6 month period and I had just bought a 2003 XKR with 11,000 miles for £17k- it had probably been worth 32k in April- so that period must have been the real downturn. Interest rates had gone from 5.5 percent to 0.5- we were on a tracker mortgage so were massively better off.
Drove the XKR for a decade and sold it for £15k. That was cheap motoring!

 

[gizlaroc]

5 year old XKR for £17k. Nice!


Yeah I remember sitting at the Eurotunnel terminal, I think there had been a fire the day before, but we were delayed and while sat there I had opened a letter from Santander, I had just changed mortgages a few months before, went from a 20 year repayment to a 20 year interest only self cert.
Reason being we were in two minds whether to rent our place out and buy somewhere else, so we chose a 0.49% tracker above base, not because of being shrewd or anything, just it was the only product on the table that I could do over the phone with no fees and no early exit penalty.

The letter basically said, sorry, we had not readjusted your rate, we have now and here is a refund for the overpayments.

It was amazing for us, we went from £1150 a month to £176, in the space of around 6 months or so.

We overpaid a bit, probably not as much as we should have, but then it meant I could also pay myself a bit less, which helped the business and carry on doing my bit to keep the economy going buying toys.


That offset tracker has been brilliant for us, we just use it as a savings pot that we can delve in and out of.
We have had it nearly down to zero a couple of times, then taken out from it, it has given us some great flexibility, allowed us to borrow at rates we simply wouldn't get elsewhere, and has saved our bacon a few times over the last 16 years.

It is a shame there are not more products like that available today.

Say borrow £400k over 35 years, but the repayments are set up to clear it over 25 years, you can then delve in and out of any excess you have built up if times get a bit tough.
I think too many people get in trouble financially because the cost of living is so high now that we don't have enough buffer, that we can get our hands on, if say out of work for a few months.
Product where you almost combine your mortgage and pension pot into one. You look at a single product that is accessible in times of need.

The one thing I like with the offset mortgage is I can see each month how much money they are giving me back with the money I have in my savings account. It makes you want to save more.

Anyway, sorry, going off topic and rambling. But I do think we could have some better products that would genuinely help people and allow the funders to make some money too.

 

[plavix]

The one thing I like with the offset mortgage is I can see each month how much money they are giving me back with the money I have in my savings account. It makes you want to save more.

I took out my offset mortgage in 2002 and it's the best decision I ever made. Even from a simplistic analysis it's enabled me to pay no interest on my mortgage, even though I think it was close to 7% at one point. When interest rates were low there was little point earning 0.1% savings interest on them in any case as the mortgage rate was closer to 2%

What an excellent analysis of the current market. When it first became a ‘thing’, PCP worried me from a consumer debt point of view. The fact that people always tell me their monthly payment, forgetting the deposit, let alone the running costs of the car, reflects how well the car industry have done in making things sound much cheaper than they are.

+1

Back on topic, does that mean I could potentially buy a GT3RS close to original list price soon?

 

[Harryblue]

Back on topic, does that mean I could potentially buy a GT3RS close to original list price soon?

I don't know what list is/was, I haven't even looked, but I think you might not be that far off on a used one if you play hardball and shop around.
If you use Chrome then download the AT Tracker and have a look yourself, I've just looked at 992 GT3s, there are plenty that have been advertised for ages and loads reduced by £20-30k and even one reduced by £45k, still not selling.

This cheapest is at OPC Guildford, reduced by £27k since first advertised back in April and now up at £152k.
Unless they made a lot on a part-ex then my guess is they paid less than list for that to buy in.

If you had a GT3RS and you took it to a dealer and asked them to buy it from you, I think they'd offer you less than list.

Screen prices on forecourts are a lagging indicator of the market, you can't read anything from them until the market openly falls and everyone has to admit it. At the moment the charade is still playing out and the real acid test is what you get offered by them when you try to sell your car to them.

 

[plavix]

List on the 3RS was around £160K from memory. Plus options obviously. The GT3 was around £130K, plus options. £20K over list for a GT3 sounds like good value, assuming it probably had that much in options.

 

[Harryblue]

So not that far off now then, most GT3s would have £10k+ in options.

If I were looking then I'd draw up a list with decent options and start lowballing, I reckon there are big discounts to be had now if you are willing to drive a hard bargain. I normally try and be as fair as I can, I hate lowballing, but the dealers were happy to rinse us when there were big premiums to be had, so now I'm happy to return the favour and drive them into the ground like a tent peg

 

[pizzahut]

It's hard to say for sure, but I think we might be seeing a shift. The crazy premiums on some cars seem to be cooling off a bit. Maybe it's just a temporary dip?

 

[jonttt]

Interesting thread, its refreshing to see discussions on financne by people who know what they are talking about. A few random added comments from me:

- re BMW / Merc massive incentives to take finance even when you don't need to......there where often then two choices once finance was used :

1) if your where not brand loyal, simply pay off the finance in full after the first payment (they hated this but could not stop it).
2) structure on a year longer and lower annual mileage than you wanted / needed eg 3 years on 10k miles pa when in practice you wanted 2 years on 15k pa. If you where brand loyal you could then hand the car back early after the 2 years with excess mileage on for no penalty so long as you jumped into another finance deal.
The above was common practice on 7 series and S class ie the high end cars and to some extend on the M / AMG models.

Capital gains tax, its likely (as in 101% lol) that Labour as part of their floundering to get out of the corner they have backed themselves into (impossible to do) will increase CGT to at least equate to income tax (which there has always been a strong argument it should be in any case) .........this will have a positive impact on any asset class which is exepmt from CGT such as cars (ie classic cars but any car that perceivably can increase in value)........in the real world its not just the increased financial incentive to invest in those assets but their ability to use them as a tool by the wealthy to "move money"........classic cars have always been attractive in that regard and labour will likley facilitate that ironcially ie price of desirable / rare / classic cars are not necessarily driven by the car market itself, they are just an asset to be bought and sold like fine wine etc.........

 

[stichill99]

Interesting thread, its refreshing to see discussions on financne by people who know what they are talking about. A few random added comments from me:

- re BMW / Merc massive incentives to take finance even when you don't need to......there where often then two choices once finance was used :

1) if your where not brand loyal, simply pay off the finance in full after the first payment (they hated this but could not stop it).
2) structure on a year longer and lower annual mileage than you wanted / needed eg 3 years on 10k miles pa when in practice you wanted 2 years on 15k pa. If you where brand loyal you could then hand the car back early after the 2 years with excess mileage on for no penalty so long as you jumped into another finance deal.
The above was common practice on 7 series and S class ie the high end cars and to some extend on the M / AMG models.

Capital gains tax, its likely (as in 101% lol) that Labour as part of their floundering to get out of the corner they have backed themselves into (impossible to do) will increase CGT to at least equate to income tax (which there has always been a strong argument it should be in any case) .........this will have a positive impact on any asset class which is exepmt from CGT such as cars (ie classic cars but any car that perceivably can increase in value)........in the real world its not just the increased financial incentive to invest in those assets but their ability to use them as a tool by the wealthy to "move money"........classic cars have always been attractive in that regard and labour will likley facilitate that ironcially ie price of desirable / rare / classic cars are not necessarily driven by the car market itself, they are just an asset to be bought and sold like fine wine etc.........

I had better get my mk1 golf gti's finished then!