Automotive Market Data - Financing/leasing/debt/ownership/sales etc

J

jimmybell

Veteran
 SW London
Basically if you're a stats geek, and always wondered how so many people afford such nice new cars... including your neighbour who can barely afford the bus... they're all on finance :)

http://www.experian.com/assets/automotive/white-papers/experian-auto-2015-q1.pdf?WT.srch=Auto_Q12015FinanceTrends_PDF

~85% of all new cars purchased are financed.
~55% of all used cars are financed.

Whilst this is US statistics it's interesting nonetheless.

For UK comparative data:

http://www.telegraph.co.uk/finance/newsbysector/industry/engineering/11336718/Britiains-car-market-is-roaring-ahead-but-how-long-can-it-last.html
http://www.fla.org.uk/main-data-content/files/2014/redirect/765gjtY/submo_776yietRWTREYYGUGIHI_87/2014-Annual-Review-For-Web.pdf
http://www.buckingham.ac.uk/wp-content/uploads/2014/11/pnc-2014-usedcar.pdf

briefly looking at those we're talking minimum 75% of new cars being financed, one chart of FLA members suggests in 2014 their members financed over half of the total number of new cars registered (1.3mil out of total 2.4 mil) alone! (ignores anyone getting personal loans, crowd funded loans, bank loans, secured loans, using their mortgage etc).

another interesting deduction from a snippet in the BCA paper - the least important factor when deciding where to buy a new car from is 'low finance', things like friendliness, locality, 'bought from before' rank much higher. Yet we know 75%+ cars are financed. So people are basically hopping to their local dealer and paying whatever they're told to! brilliant. No wonder BMW is doing so well.

Lots of interesting things to deduce from all of this (for me anyway, i'm a geek). Most popular car was the Fiesta.. starting at around £10k. Avg UK salary is around 26k.

You can safely assume that people, on average, are likely financing cars to the value of ~50% their annual income. Yet all advice is you should never really spend more than 10-20% annual income on a car, unless you're a car nut - where up to 50% might be realistic if you can afford it.

No doubt this transfers to the housing market too, and surely we cant be that far off course for another round of sub-prime? One of the papers i linked suggest ~10% of borrowers for new cars are sub-prime (experian score of 501-600). I wonder if they create CDO's from bundles of sub-prime car financing, and create non-prime at avg score of 6-700. lol. Recession anyone?

Here's a fluffy cat to cheer you up:
fluffy_cats_-(26).jpg
 
Halifax have launched a low APR car loan for existing customers. The catch....? It's a secured loan on the car so maybe they've seen what you have!

On the other hand there was a report the other day that suggested UK consumers were much better prepared now for a 1% rise in interest rates.
 
Its fool's gold jimmy but it won't stop now no matter where interest rates go , far too many in the loop now of the new car feel even if they never own them .
I drive up my cul de sac each day & can't fail to see the 75/80% of financed cars including one chap in a 2 bed starter home with 2 children who recently traded "his" S4 for a brand new RS6 ! £60k car living in a £130k home , , , , fools gold
 
What's with the cat? Made me smile tho :)

I have to say it's no wonder that people finance it because they are making it so cheap. People end up getting a car they didn't think they could have or one they wouldn't even consider as it was far out of reach. However they are usually buying on the 'never, never' and handing it back or getting into another car in two or three years and it just continues.

Lad at work recently bought a new ST2 estate. Was tempted into it intially by a finance deal which ended up costing more than advertised after extras etc. I know he pays £200 a month, put down £5k cash and traded in his 1.6 focus estate which was 7 years old. After 2 years you pay the balloon, chop it in for a new one or walk away. It all came out about how much he was paying as I got an offer for a 640D GC, basically 3k down and 23 months at £320 a month and then just hand the car back. He's already talking about handing his car back and I almost choked at how much money he was just handing out to have sod all to show at the end of it.

Other problem with people financing like this is that every two to three years the market is flooded with cars on the second hand market which in turn pushed the value down, especially if you drive a 318 or 320 or a 114, 116,118 or 120
 
The nearly new dealer Motorpoint have their own finance deals designed specifically to keep customers longterm no matter what car brand they prefer , its called "Boomerang" for a reason & i know 3 folks who have been on it for their last 3 cars :cry: spinning plates or chasing tails is what the deals should be called
 
Yep. The worst thing is it targets the poorest too. Those who can't afford Hire Purchase or a loan over the PCP. The less you can afford, the worse the deal. The worse the deal the less you get back and the longer you get tied into endless cycles of paying out cash for no return.

I'm sure some of these deals make sense on high value, high depreciation cars that those not suffering low wages can afford. PCP on a new f-type is probably not dissimilar to the depreciation on it, though even if i could afford it, i'm not sure id be happy with the concept of being committed to that much of my net wage outgoing! crazy really. Surely they're just designed for those who have no choice.

Also - regarding minimum wage - yep. £26k is quite a bit of cash in some parts of the country, i know if i'd of been earning that back home in nottingham i'd of been laughing happily. Down here in London, as stupid as it sounds (and i genuinely think people don't realise until you're here to experience it first hand... i know, i've been on both sides) it's barely enough to do much more than exist. I think rent/bills/travel are going to sap up ~70% of that wage easily, in a "cheap" area.

And angie - not a bad rate on the 640 GC - compared to depreciation on new! still.. 10k for 2 years i always feel lke you could beat by doing some shopping around.
 
jimmybell said:
Basically if you're a stats geek, and always wondered how so many people afford such nice new cars... including your neighbour who can barely afford the bus... they're all on finance :)


~85% of all new cars purchased are financed.
~55% of all used cars are financed.

Whilst this is US statistics it's interesting nonetheless.

For UK comparative data:


briefly looking at those we're talking minimum 75% of new cars being financed, one chart of FLA members suggests in 2014 their members financed over half of the total number of new cars registered (1.3mil out of total 2.4 mil) alone! (ignores anyone getting personal loans, crowd funded loans, bank loans, secured loans, using their mortgage etc).

another interesting deduction from a snippet in the BCA paper - the least important factor when deciding where to buy a new car from is 'low finance', things like friendliness, locality, 'bought from before' rank much higher. Yet we know 75%+ cars are financed. So people are basically hopping to their local dealer and paying whatever they're told to! brilliant. No wonder BMW is doing so well. And the funniest thing is, most people don't even compare the terms. They go to the nearest dealership, they're offered a comfortable monthly payment, and that's it. Although there are now plenty of services where you can preview financing options and not be completely dependent on the dealer — fcloans, for example.

Lots of interesting things to deduce from all of this (for me anyway, i'm a geek). Most popular car was the Fiesta.. starting at around £10k. Avg UK salary is around 26k.

You can safely assume that people, on average, are likely financing cars to the value of ~50% their annual income. Yet all advice is you should never really spend more than 10-20% annual income on a car, unless you're a car nut - where up to 50% might be realistic if you can afford it.

No doubt this transfers to the housing market too, and surely we cant be that far off course for another round of sub-prime? One of the papers i linked suggest ~10% of borrowers for new cars are sub-prime (experian score of 501-600). I wonder if they create CDO's from bundles of sub-prime car financing, and create non-prime at avg score of 6-700. lol. Recession anyone?

Here's a fluffy cat to cheer you up:
fluffy_cats_-(26).jpg
Click to expand...
It's long been the norm—people buy a monthly payment, not a car. :)
That's why there are so many new BMWs and Audis on the road, owned by people with fairly average incomes. PCP/leasing is very clever psychologically: "just £299 a month" sounds much easier than "I'm committing to £25-30k."

But honestly, I wouldn't compare car loans to the 2008 subprime mortgage. Cars are assets that quickly lose value, terms are shorter, amounts are smaller, and banks are still assessing risk much more rigorously after the crisis. Although the rise of subprime car loans in the US is indeed unsettling for many.

And yes, people almost never choose financing based on the interest rate—they prioritize approval and a comfortable payment. Therefore, dealers make a good profit not only on the car but also on the loan itself.
 
You must log in or register to reply here.
Back
Top Bottom