# How come there are so many expensive new cars on the roads?



## bmount (3 Jun 2016)

I was wondering how people can afford the vast number of new cars, lets say 141 and younger
on the road in the higher end price range 40k+.

Are these people paying cash ? Then well done to you.

Large hire purchase monthly repayments at terrible interest rates ? Why do you do it ? 
I hope you can afford it. Why do we like debt so much in this country and to show off in flashy cars ?

I reckon to justify a landrover as a priority in your life you need to have a 200k salary, own a successful company, be in the higher professions etc.

We have a 1.25m valued house with 400k mortgage and a 2004 audi a4 but could never afford or justify a new loss making car (due to looking after our childrens futures primarily and the mortgage and important things like skiing!). 
There are people a mile away from me, in lets be honest here very average 1950s pebbledashed semi d homes with no less than 2 151 BMW SUVs outside at least 70k each value. Can anyone explain the logic here ? Again well done if you aspire to that and can genuinely afford it.


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## emeralds (3 Jun 2016)

Maybe they don't have a €400,000 mortgage.


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## bmount (3 Jun 2016)

or value material things that are not good investments.


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## cremeegg (3 Jun 2016)

Your post reminds me of living in London in the 1990s. I rented a room in a house that at home I would have considered very poor. A tiny kitchen, sitting room and converted bedroom downstairs and two bedrooms and a bathroom upstairs. The whole thing would nearly have fit in my parents kitchen.

The street was full of similar houses, which in Ireland if you knew someone who lived in a house like that, you would have thought it was unfortunate that they couldn't afford something bigger. 

The street was also full of new high end cars. I knew no one in Ireland at the time driving a new BMW or Audi, this street was full of them.

Different values I guess. You are probably getting old like me. Look at this thread, everyone needs a new BMW.


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## JamesN (3 Jun 2016)

People are inherently different and choose to focus their budgets in different proportions on different priorities.

We have one 10 year old car and are choosing to build up cash reserves at the moment. My sister & husband insist on 2 new BMW's every 3 years, yet they are in an insolvency process with the banks. We earn broadly similar salaries.

I shop in Lidl, She shops in SuperValu.


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## bmount (3 Jun 2016)

Yes different values I suppose, good replies cremeegg and JamesN.

What actually would be interesting to get some figures on what % of the high end cars on the road are 
3 or 5 year expensive agreements, or bank loans, versus cash buyers. 

Maybe its published somewhere....


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## thedaddyman (3 Jun 2016)

personally, I drive 35K+ miles a year so I prefer to drive a good decent and safe car. Not a 40k+ one in my case but I change it ever 2-3 years due to mileage. Everyone's circumstances are different, I don't want an old car with fewer safety features and more likely to break down due to the amount of time I spent driving


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## PGF2016 (3 Jun 2016)

I was thinking the same. I read that the vehicle with the most sales this year is the Hyundai Tuscon ([broken link removed]).


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## AlbacoreA (3 Jun 2016)

cremeegg said:


> Your post reminds me of living in London in the 1990s. ...The street was also full of new high end cars. I knew no one in Ireland at the time driving a new BMW or Audi, this street was full of them...



Can't really compare it to England. The costs of running and owning a car in the UK are a lot less than they are here, and its a bigger more competitive market for cars.


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## Steven Barrett (3 Jun 2016)

Expensive cars are usually paid by:


Personal debt
Company cars
Lease plans

Steven
www.bluewaterfp.ie


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## PaddyBloggit (3 Jun 2016)

What are the ways less expensive cars are paid for SBarrett?

When you mention personal debt above are you talking about the car loan from the bank, credit union etc.?


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## Firefly (7 Jun 2016)

The vast majority are on the never-never I would think. Most will have balloon payments to boot (pardon the pun!), meaning that from Jan 2017 onwards there should be a plethora of cars hitting the 2nd hand market. A lot of people are getting over-exposed again I think. Perhaps not in the grand buy-to-let sham in the mid 00s, but lots of debt nonetheless.


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## MrEarl (7 Jun 2016)

Firefly said:


> The vast majority are on the never-never I would think. Most will have balloon payments to boot (pardon the pun!), meaning that from Jan 2017 onwards there should be a plethora of cars hitting the 2nd hand market. A lot of people are getting over-exposed again I think. Perhaps not in the grand buy-to-let sham in the mid 00s, but lots of debt nonetheless.



I would tend to agree ....

The car has traditionally been one of our "status symbols" so a new flash is high on many peoples' list of priorities.

The finance arrangements on offer from several of the larger car manufacturers, offering 0% or 3.99% finance cannot be ignored ... but people should be very careful before signing up for such arrangements, given the serious financial implications they are committing to.

It makes perfect sense for those spending a lot of time in their cars to want a good quality, reliable car.  But thereafter, there are few reasons to justify the expenditure and people in the mindset of buying new (or near new) cars.

I strongly recommend that people take a serious look at quality second hand cars.  The likes of Mike Brewer and Edd China on Discovery Channel's Wheeler Dealers for example, shows just how good a car you can have at a reasonable price (even if it does need a little work when you first get it)


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## Firefly (7 Jun 2016)

Given that a lot of these new cars are funded by borrowings and that there has clearly been a huge increase in purchases, I presume the Central Bank (who after-all regulate these lenders) are taking a close look?


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## Bronte (7 Jun 2016)

Maybe young people who cannot buy houses are buying cars instead.  Ireland it would appear to me to be booming again - based on observations and trips back.  Also noticed traffic has greatly increased.  Any of my family that were unemployed are now all working again for a long time.  Some of them are working their way out of debt.  I assume some others in Ireland have rid themselves of debt and are maybe splashing out. 

I was listening to Michael O' Leary on Newstalk, didn't he once say there was no need for the new terminal.  Well I use both terminals and they are heaving.


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## trasneoir (7 Jun 2016)

bmount said:


> I was wondering how people can afford the vast number of new cars, lets say 141 and younger
> on the road in the higher end price range 40k+.


Since 2010 it seems like all the manufacturers/dealers have switched from offering subsidized personal loans to PCP financing. This seems to have the effect of making it more attractive to replace every 3 years rather than make the balloon payment at the end and own/keep the car. http://www.consumerhelp.ie/pcp



thedaddyman said:


> personally, I drive 35K+ miles a year so I prefer to drive a good decent and safe car. Not a 40k+ one in my case but I change it ever 2-3 years due to mileage. Everyone's circumstances are different, I don't want an old car with fewer safety features and more likely to break down due to the amount of time I spent driving


I think the primary motivation for a lot of our car spending is to signal status. New car buyers often cite Reliability and Safety are primary motives. I think there's an element of rationalization at work here:

*Reliability*
Good quality cars have been very reliable for the last 20 years. Unless you buy a lemon, the days of long car trips being a lottery are gone.
In 10 years and 200k of driving <€5000 cars, I have experienced 1 breakdown. I was off the road for 1 hour, and the experience cost me ~€300 to replace an expired fuel pump. Breakdown assistance costs €20/30 per year. Unless your time is unbelievably valuable, the depreciation costs of a newer car dwarfs the increased cost of breakdowns and maintenance on an older car.
I suspect that a 2 year old car is more reliable than a brand new one, since manufacturing/assembly/software bugs are most likely to shake out during the first weeks/months of a car's driving life.

*Safety*
I don't think that crash survivability has seen any major improvements since the widespread adoption of airbags 15 years ago. 
In terms of passive safety (ie avoiding crashes): 
ABS and traction control has been available since the late 90s and standard since the 00s.
Fancier stuff like ESP, automatic emergency braking, blind spot alarms, and driver monitoring have only been around for a few years, and definitely offer some value - maybe a few seconds of extra life expectancy per hour of driving. For most people, there are cheaper ways to improve one's health outcomes.


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## Easeler (7 Jun 2016)

Its very much an individual thing I think,as someone that use to work in the maintenance of corporation houses in Dublin I used to be amazed at some of the conditions these people were living in and they might have a new car outside the door totally mad to me, but saying that my own father had the exact same attitude you didn't have it made until you landed with a new car. I perfer a nice house myself.


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## PaddyW (7 Jun 2016)

My 'new car' is a result of coming into some money. It's a 131 and it's the newest car I've ever had. My previous car was 13 years old and same with the one previous that I replaced it with. I bought the latest one as I had the cash right there and it'll probably be the newest I'll ever buy so may as well take the opportunity.


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## Joe_90 (7 Jun 2016)

There is limited value in 2-3 year old second hand cars at the moment so people are going for new ones instead.


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## Gordon Gekko (7 Jun 2016)

PCP can be great in certain circumstances and it's certainly driving the growth in new car sales.

I think it's interesting though to take a walk around the car park of a firm with really well paid employees. You'll typically see high end cars in the 2 to 6 year age range, probably without a cent owed on them, and no new cars.

I would never buy a new car personally.


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## trasneoir (8 Jun 2016)

Joe_90 said:


> There is limited value in 2-3 year old second hand cars at the moment.


Why is this?


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## postman pat (8 Jun 2016)

How come people have such expensive houses.......


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## Bronte (8 Jun 2016)

Honestly don't understand why people are changing cars every 3 years unless they are doing major mileage. I don't think you have to buy expensive to get reliability.

My car was purchased new in 2010, the alternator broke in the first two years but was repaired for free.  Had two accidents, one my fault (drove into a car in a basically empty supermarket one morning very early) the other someone pulled out of a parking spot into me.  No major damage either time.  About 50K on the clock now.  A city run around.  I do the annual service and have to do an MOT every year now.  Changed tyres once I think, might be twice (when the garage tells me too) but because it's a small car it doesn't cost much.  My car tax is lower too because of it's size.  But it takes 5 people and the boot seems tiny but I can do a big shop in it.  (Opel Agila - to you guys based on the Suzuki Wagonlit). Cost me €15.65 a week in petrol last year.  Great for parking.  I'll keep it until it falls apart.  That's a joke, no I'm not allowed to do that here but you know what I mean, when I'm told a repair means something major has gone then I'll replace it with one that has a 5 year guarantee.

My husband's car, well as far as I'm concerned it's all about ego.  Naturally he hates my car.

PCP

This is a very big trend in Ireland.  Is there a downside? 

I'll fund mine in cash or with a car loan that has zero interest, that's how I bought my current car from Opel and ditto my husbands Renault.  I refuse to pay interest needlessly but it's a major purchase so people should be planning in advance for when they are going to buy if they possibly can. 

We once had a poster on here who was changing his car nearly yearly, ended up with debt of something like 80K (that was around the height of the celtic tiger madness), think it was his wife who came on here in despair.


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## aristotle (8 Jun 2016)

Gordon Gekko said:


> I think it's interesting though to take a walk around the car park of a firm with really well paid employees. You'll typically see high end cars in the 2 to 6 year age range, probably without a cent owed on them, and no new cars.



Yes, I see that in my place of work as well. Average salary might be 70k yet nearly no new cars but a good few high end cars 2-6 years old.

In my opinion, when you start accumulating some money you value it more rather when you don't have very much then it is too easy to sign up to a car loan.


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## Firefly (8 Jun 2016)

Bronte said:


> I'll fund mine in cash or with a car loan that has zero interest, that's how I bought my current car



Ditto - both of ours were paid for with the filthy lucre! Mine is 10 years old and Mrs. Firefly's is 15 years old. Both are good for ages yet as our mileage is quite low, but I'll probably change mine in the next 2-3 years when all these ex-PCP cars start flooding the market!


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## Firefly (8 Jun 2016)

aristotle said:


> In my opinion, when you start accumulating some money you value it more rather when you don't have very much then it is too easy to sign up to a car loan.



Very true!


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## Jazz01 (8 Jun 2016)

Firefly said:


> Mine is 10 years old and Mrs. Firefly's is 15 years old. Both are good for ages yet as our mileage is quite low,



just remember, getting insurance is an issue now for "older" cars - specifically for cars around the 15 year mark!


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## Firefly (8 Jun 2016)

Jazz01 said:


> just remember, getting insurance is an issue now for "older" cars - specifically for cars around the 15 year mark!




We insured the 15 year old car before it turned 15 (??!!) so we're good for another 9 months, but yeah, take your point thanks. Maybe herself will be getting a new jalopy before me so!


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## aristotle (8 Jun 2016)

New cars are for people who either have no financial goals or are very wealthy!


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## Gordon Gekko (8 Jun 2016)

aristotle said:


> New cars are for people who either have no financial goals or are very wealthy!



Agreed. In my experience, new car owners are either extraordinarily wealthy, or struggling to keep up with the neighbours.


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## willyfones (8 Jun 2016)

I would say it is related to PCP deals or the fact that there is a lot of cash tucked away on deposits maybe people are beginning to splurge again.. as someone who doesn't even own a car.. I can't understand buying anything over 20k myself so anyone paying 80k+ is just obscene.
Unless you are some sort of car enthusiast  

PCP deals are bad news for the following reasons.

*Ownership* - you don't own the car (the finance company does, you can pay a large balloon payment at the end of the agreement but this can be as high as 35% of the car price).
*Conditions attached to GMFV* (guaranteed Minimum Future Value) is full of conditions reducing the value of the car - upper mileage limit for example will incur significant financial penalties.
*Set up/ Documentation fees can be significant
Breakage fees*  The finance company will charge you up to 70% of the interest they *would have* received or they take back the car.
*End of the Agreement *as mentioned Pay a balloon payment or hand back the car.

Save and buy with cash or If you look at the terms of any Credit Union car loan they are better value long term.


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## Leo (8 Jun 2016)

willyfones said:


> Save and buy with cash or If you look at the terms of any Credit Union car loan they are better value long term.



Some brands are offering way more attractive rates though. Some CUs are charging over 10% APR!


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## Bronte (8 Jun 2016)

Firefly said:


> We insured the 15 year old car before it turned 15 (??!!) so we're good for another 9 months, but yeah, take your point thanks. Maybe herself will be getting a new jalopy before me so!



I never dreamed my car would last so long.  My mother was forever going to the garage with her jalopy.  No idea how she passed the Irish NCT with the amount of dints and bangs and doors not locking etc.

Is 15 years now considered the max, I was thinking mine is holding out so well I might be able to let the eldest have it as a first car, as a) it will cost me nothing b) it's worth nothing, I asked the trade in value about 5 years ago and was told 1K, c) it's not a fast car d) excellent starter car for bumps and scrapes 

PCP does seem to be the new thing.  I'm sure if I looked into it that it ends up costing a fortune.  Prior to my 'new' car I always had second hand, but bought from a reputable garage and with a guarantee.  I was there recently as they invited people to a BBQ as I wanted to see the new model of a small car, in preparation for the day my car dies, and I noticed their second hand cars were 3 years old max.


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## Bronte (8 Jun 2016)

willyfones said:


> PCP deals are bad news for the following reasons.



Well what's the odds we're going to have a few posters in the future who are regretting going down the PCP route.  A worked example of the figures might be interesting.


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## trasneoir (8 Jun 2016)

postman pat said:


> PCP
> This is a very big trend in Ireland.  Is there a downside?


If you fail to pay your lease, the finance company will repossess their car, sell it, and bill you for the remaining balance. Traditional car loans are unsecured.

When you arrive at the end of a lease, you can either
a) pay a 30-35% final payment and drive away with your car.
b) walk away, discarding your equity in their car (you've paid 75-80% of the sticker price by now). If you have exceeded the agreed mileage, you will get a bill.
c) roll the equity into deposit for a new PCP agreement, and "drive away in a new car with the same low monthly payment". If you have exceeded the agreed mileage, your equity/deposit will be less than expected.

For punters who aren't good at saving, option c becomes the path of least resistance, even though it's the most expensive option long term. Customers who like to drive new cars and who don't like financial planning will find that car payments become a permanent part of their lives.

It's not hard to see why manufacturers/dealers prefer this arrangement to any sort of car loan, let alone a discounted one. I imagine that discounts for cash buyers are becoming a thing of the past?


Edit: a case study.
Avensis D-4D 112 (2.0) Luna Touring Sports Navi + options

*Cash*
Total Cost: €33,170

*Toyota Flex PCP*
Deposit: €2,281
Repayments: €611 for 36 months = €22,009
Final Payment: €12,712
Total Cost: €37,066 (111% of cash price over 36 months)

*Hypothetical 7.9% car loan*
Deposit: €2,281
Repayments: €966 for 36 months = €34,794
Final Payment: €0
Total Cost: €37,075 (111% of cash price over 36 months)

*Toyota Flex PCP + Personal loan to cover balloon payment *
Deposit: €2,281
Repayments: €611 for 36 months = €22,009
Balloon Payment: €12,712
Personal loan to cover balloon payment: €609 for 22.5 months @ 7.9%
Total Cost: €38,081 (114% of cash price over 58.5 months)


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## Jazz01 (8 Jun 2016)

trasneoir said:


> If you fail to pay your lease, the finance company will repossess their car


I assume there will be a number of cars being sold privately before the company repossess, with no mention of "outstanding finance" on the vehicle - even if you ask the private sellet at the time - "_buyer beware_" kicks in! 
Is there an easy way of checking for outstanding finance on a vehicle - or is just through the usual "car history check" web sites?


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## Leo (8 Jun 2016)

trasneoir said:


> So, as a PCP customer, unless you've got the discipline to save that extra €350 per month to cover the final payment, you'll be a PCP customer forever.



The customer will have the option to finance the final payment, either via the dealer at the same rate as they're on, or via bank or CU loan. Some dealers are offering finance around 4% on PCPs as well (VW even had 0% offers for a while).


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## Firefly (8 Jun 2016)

Jazz01 said:


> I assume there will be a number of cars being sold privately before the company repossess, with no mention of "outstanding finance" on the vehicle - even if you ask the private sellet at the time - "_buyer beware_" kicks in!



Very good point!


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## Gordon Gekko (8 Jun 2016)

PCP can make sense for some people though...0% finance in certain circumstances and great for someone with deferred remuneration.


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## trasneoir (8 Jun 2016)

Leo said:


> The customer will have the option to finance the final payment, either via the dealer at the same rate as they're on, or via bank or CU loan.


Good point. I'll add this scenario to the case study.



Leo said:


> Some dealers are offering finance around 4% on PCPs as well (VW even had 0% offers for a while).


In the case where the dealer/manufacturer is offering subsided finance, the cost of the subsidy is baked into the car's sticker price. I'd expect the cash price to be correspondingly lower than the sticker price to a savvy cash buyer.


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## Leper (9 Jun 2016)

Having graduated through the driving ranks bicycle, motor-bike, car I can't think of a faster way of flushing money down the toilet other than buying a new car. Once you drive that car from the sales forecourt the value drops significantly in those first few seconds of your enjoyment. But, if you can afford to waste such money, keep at it and trade the car in  three years later and then I could be its next purchaser.  Just keep it in good nick and I will ensure its safety for another eight years.


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## Gordon Gekko (9 Jun 2016)

When you speak with people with truckloads of cash, they're generally appalled at the idea of buying a new car (except maybe at ultra HNW level where €20k can be like €10). What's the point, when you can let someone else take the huge hit (perhaps €20k a year) and walk into Joe Duffy/MSL/Spirit with cash and hammer out a great deal for something really nice and only a couple of years old, but still under warranty.


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## Grizzly (9 Jun 2016)

My car is 11 years old. My wife's car is 13 years old. Both in great order with low mileage.

It concerns me that at 15 years old I may not be able to get insurance on these cars or be able to shop around for insurance. I may be stuck with my existing insurer who will then raise the premiums because I am trapped.

We could both purchase new cars tomorrow with our savings that are earning us practically nil interest at the moment. We don't want two new cars. We don't need two new cars.

As we approach "pension age", we are concerned that one of us will be means tested and as a result get no state pension or a hugely reduced state pension. So what do we do?  Do we spend our savings on two new cars. Get the new kitchen, home improvements etc.
(Our home is nice and kept well).

It bothers me that I may have to dump two perfectly good cars in a few years time. 

A thought did occur to me that I could put both cars away until such time as they become "classic" cars and then resurrect them in the future.


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## Delboy (9 Jun 2016)

I find 'hammering out deals' in Dublin with cash in hand is a fiction.
I was practically insulted by a pup of a salesman when I tried to bargain. He told me to be on my way....and this for an expensive 2nd hand 2 yr old car which was only 6k less than the new model beside it!!!


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## Purple (9 Jun 2016)

Delboy said:


> I find 'hammering out deals' in Dublin with cash in hand is a fiction.
> I was practically insulted by a pup of a salesman when I tried to bargain. He told me to be on my way....and this for an expensive 2nd hand 2 yr old car which was only 6k less than the new model beside it!!!


Car dealers make money by selling new cars, selling second hand cars and selling finance. The last one can be the best revenue stream. They also make money from parts and servicing but that’s not relevant to this discussion.

If they sell lots of new cars and don’t turn over the second hand’s they will have to have a serious line of credit with their bank but if they have sufficient working capital then they may be making more money selling the high value second hand cars than they are selling the new ones.


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## aristotle (9 Jun 2016)

Delboy said:


> I find 'hammering out deals' in Dublin with cash in hand is a fiction.!!!



My experience as well and that was during the bottom of the recession in 2011. No or very little movement on price but was fairly easy to get extra's like re-spay of bumper and small things fixed as part of a sale.


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## Purple (9 Jun 2016)

aristotle said:


> My experience as well and that was during the bottom of the recession in 2011. No or very little movement on price but was fairly easy to get extra's like re-spay of bumper and small things fixed as part of a sale.


When they take a trade-in it's on their books at €X and if they sell it for less than €X they are making a book loss. Fixing bumps and the like doesn't show as a cost so it's easier to get more for the same money than the same for less money.


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## Leo (9 Jun 2016)

trasneoir said:


> In the case where the dealer/manufacturer is offering subsided finance, the cost of the subsidy is baked into the car's sticker price. I'd expect the cash price to be correspondingly lower than the sticker price to a savvy cash buyer.



A lot will depend on the particular make/ model, how popular they are and how the dealership is doing against their quarterly targets. If you're not fussy about a particular make or more so spec, then you will likely find a good deal. If you're after something popular, or a spec that's in lower supply, you may struggle to get much. I also had a salesman walk away when inquiring about what they considered a niche model (larger petrol engine!) if I wasn't offering within hundreds of the sticker price, he had no interest. 

It will be very interesting to see what starts to happen in ~2 years time when a lot of the PCP deals come to decision time. I think one of the reasons for their popularity of late has been a significant shortage of good quality 2-3 year old cars at a reasonable price. Look at a few examples in the more popular family / small SUV segments and it's common to see around a 20-25% drop after 2-3 years. With some scrappage or similar deals to be had on the new models, it makes a more compelling case for the new one. Nissan for example are offering 4k, and 6.9% on the PCP deal, or 4% if you don't avail of scrappage. If however in 2 years a lot of these PCP financed cars start coming on the second hand market, then prices will fall with supply, and the new car becomes less compelling again.

People have different tastes and different priorities. If we were to reduce every purchase decision we make into what makes most financial sense, we'd all be living in bedsits, working two jobs, buying second hand clothes, watching small portable TVs, eating the cheapest own-brand food, never taking a holiday, never drinking alcohol, never eating out.....the list goes on. But hey, life's short, a little indulgence feels good every now and then.


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## Ceist Beag (9 Jun 2016)

Delboy said:


> I find 'hammering out deals' in Dublin with cash in hand is a fiction.
> I was practically insulted by a pup of a salesman when I tried to bargain. He told me to be on my way....and this for an expensive 2nd hand 2 yr old car which was only 6k less than the new model beside it!!!


I think part of the reason for this might be that it is so easy for consumers to compare prices these days that everyone is very aware of the price bracket for second hand cars. It used to be the case that dealers had their little black book of resale value and were able to offer lower prices on trade in as those trading up weren't as clued in as to what their old car was worth. These days, with the various different websites out there, most people have a good idea what their old car is worth and are probably getting a better price on it when trading up, therefore leaving the dealer with less wriggle room when selling on the car again.


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## Gerry Canning (9 Jun 2016)

Answer to why.

We are in a mini-boom .
Things may get boomier .
Things may get boomiest.
Things may go bang !.

That said, there is a confidence that is good to see and I hope my (doubts) of things going pear shaped again won,t happen.


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## bmount (9 Jun 2016)

Yes, this could be another balloon. Lets hope people have learned from the last time.


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## Gordon Gekko (9 Jun 2016)

If the overarching story is people purchasing new cars on the never never without the means to pay the outstanding balance in 3/4/5 years time, it's a house of cards that will come crashing down. You'd run a mile from investing in car companies, and if in the market for a "new" car, you'd sit on the sidelines and pick up a lovely second hand model for a song.


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## mtk (10 Jun 2016)

Mini boom in my view at least in Dublin unless you lost your job ( like me!)


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## twofor1 (10 Jun 2016)

A guy I know who earns maybe €40K recently got a new €60K car, paid for in full with a recent inheritance, the kids are gone, the mortgage is paid, his reasoning is the car will last him maybe 15 years, if he didn’t spend it he would gamble it within a year.

For him anyway he did the right thing.


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## postman pat (10 Jun 2016)

just a vibe I get from this thread is that people shouldnt get above their station,,the old irish begrudgery thing again, I think what Im getting at is people can do what they wish with THEIR money(borrowings).


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## Delboy (10 Jun 2016)

postman pat said:


> just a vibe I get from this thread is that people shouldnt get above their station,,the old irish begrudgery thing again, I think what Im getting at is people can do what they wish with THEIR money(borrowings).


and when their borrowings go wrong, they can run to the David Halls of this world to protect them and expect the general public to give them never ending forebearance


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## PGF2016 (10 Jun 2016)

postman pat said:


> just a vibe I get from this thread is that people shouldnt get above their station,,the old irish begrudgery thing again, I think what Im getting at is people can do what they wish with THEIR money(borrowings).



No bregrudgery. More exasperation at people pissing away money. It is a forum frequented by people who are interested in getting the most from their money after all.


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## trasneoir (11 Jun 2016)

postman pat said:


> just a vibe I get from this thread is that people shouldnt get above their station,,the old irish begrudgery thing again, I think what Im getting at is people can do what they wish with THEIR money(borrowings).


I've introspected about this a bit.. I've come to see status and luxury as vices - we can never get enough, and their pursuit (to excess) has got sharply diminishing returns for our happiness and for the wider world. 

I'm not immune by any means - I think we're entitled to our vices, and we shouldn't begrudge them in others. I also think it's important to recognize them, and to be aware of their affect on our decisions.


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## frankde (11 Jun 2016)

Seems the most popular car owned by millionaires in the USA is a Toyota Corolla 
I read this in a financial book recently


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## Firefly (12 Jun 2016)

postman pat said:


> just a vibe I get from this thread is that people shouldnt get above their station,,the old irish begrudgery thing again, I think what Im getting at is people can do what they wish with THEIR money(borrowings).



I don't think begrudgery comes into it with respect. Actually the dealers around the country are giving out these deals to anyone with a heartbeat it seems! 

This is Sub-Prime on wheels!


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## Firefly (12 Jun 2016)

I think even the journalists are confused about this to be honest:

http://www.independent.ie/business/...oot-down-and-pick-up-a-pcp-plan-34347799.html


_"l in advance, the contract gives you a Guaranteed Minimum Future Value (GMFV). This is the amount the garage expects the car to be worth after the three years. If you choose to buy it outright, this is what you pay then. *If you 'roll over' the loan, this is your next down payment*;"_


If you owe the amount equal to the GMFV how can this be a down payment???

If I am missing something can someone please put me out of my misery and I'll head down to MSL tomorrow? I just cannot see how this will work for the 2nd and subsequent cars?


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## postman pat (12 Jun 2016)

Firefly said:


> I don't think begrudgery comes into it with respect. Actually the dealers around the country are giving out these deals to anyone with a heartbeat it seems!
> 
> This is Sub-Prime on wheels!


Firefly I was commenting on some of the early posts on this thread,as the thread went on the input got very informative and interesting about PCPs etc.


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## trasneoir (12 Jun 2016)

Firefly said:


> If you owe the amount equal to the GMFV how can this be a down payment???


GMFV is a red herring.




https://finance.toyota.ie/files/toyota_flex_pdf.pdf said:


> Part exchange your car and drive away in a brand new Toyota. If the trade in value is more than the GMFV††, you can put the equity towards your next car.


Suppose that when you come to the end of your lease - your balloon payment is 10,000. Say the car is worth 14,000. You can put your 4k of equity into a deposit.

The only scenario where GMFV comes into play is if the used car market goes into freefall. If the car is only worth 9k, and your balloon/GMFV is 10k. You can walk away and leave the financier has to eat the 1k negative equity.



Firefly said:


> This is Sub-Prime on wheels!


Not quite. The loan is structured to make negative equity very unlikely - "jingle mail" will always be good news for a PCP creditor. It's also physically and legally easier to repossess a car than a property.


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## Gordon Gekko (12 Jun 2016)

trasneoir said:


> "jingle mail" will always be good news for a PCP creditor



I can't imagine that this is the case.

A tsunami of "returned" 3/4 year old cars couldn't be good news for the retailers.


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## trasneoir (12 Jun 2016)

Gordon Gekko said:


> A tsunami of "returned" 3/4 year old cars couldn't be good news for the retailers.


Good point. If a load of punters were to return their cars all at once, the creditor would have to flood the used market (prompting more returns), or sit on some of the stock NAMA-style, or export some of it.


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## Firefly (13 Jun 2016)

Jazz01 said:


> I assume there will be a number of cars being sold privately before the company repossess, with no mention of "outstanding finance" on the vehicle - even if you ask the private sellet at the time - "_buyer beware_" kicks in!




http://www.independent.ie/life/moto...th-repayments-still-outstanding-34781461.html

Buyer beware indeed and it's going to become more prevalent I think with all these "on the never-never cars". We buy our cars from main dealers.  You do pay a bit more but I think it's worth it.


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## Firefly (15 Jun 2016)

Firefly said:


> I think even the journalists are confused about this to be honest:
> 
> http://www.independent.ie/business/...oot-down-and-pick-up-a-pcp-plan-34347799.html
> 
> ...





Looks like they've passed round the old, trusty Follan's Times Tables at the Indo:

I've had lots of mail and response following my appearance on the Marian Finucane Show last Saturday, with many people admitting they didn't realise one major factor about PCPs: what constitutes 'equity' in a car at the end of the two/three-year agreement?

Many people thought it was the agreed minimum value that they agreed when they took out the deal. That is NOT the case. The equity is the difference between the guaranteed minimum value and the prevailing market price of the car. So if the vehicle is worth €12,000 on the market and the guaranteed minimum value is €9,000, the equity is €3,000.

http://www.independent.ie/life/moto...ry-two-years-as-pcp-sales-surge-34801234.html


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## Firefly (15 Jun 2016)

From the same article:

_Volkswagen point out that as they underwrite the Guaranteed Minimum Future Value (GMFV) of the car they (VW) take the risk on the secondhand value - not the customers._

I'd certainly get that one in writing!


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## MrEarl (16 Jun 2016)

Firefly said:


> From the same article:
> 
> _Volkswagen point out that as they underwrite the Guaranteed Minimum Future Value (GMFV) of the car they (VW) take the risk on the secondhand value - not the customers._
> 
> I'd certainly get that one in writing!



It may be the case, but from what I here there are a few key considerations that need to be factored into your thinking alongside the above:

- The guaranteed minimum future value is subject to strict criteria in terms of how the car is used, serviced and how much travel it has done during the term of the arrangement.
- The guaranteed minimum future value is only against another VW, so they can set the price of their new cars at any level they want and ensure a certain margin on the transaction.
- You put equity into these deals on Day 1 (by way of cash or trade in) but at the end of the term you have zero equity in the car you acquired, so your full equity is obsorbed during the term of the agreement.

Those in the know can confirm if the above are correct or not ... I have taken them in good faith from others I know, but not experienced this first hand.


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## Firefly (16 Jun 2016)

I was thinking about this again last night. VW seems to be the biggest player and I'm thinking they introduced these deals in the wake of the emissions scandal as a way to keep car sales going. Then, seeing the success / increase in market share by VW, other brands have jumped on the bandwagon, quite similar to the housing boom where banks were giving 100% mortgages. I heard an advert for the Dacia Sandero in Cork yesterday - no deposit and 50e a week. 

Of course when the intial period expires, a lot of people will simply roll-up to another car. Even if the equity carries on for them by getting a decent deal, who is to say that the finance for the 2nd and subsequent cars will be at such favourable rates as they are now?


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## tallpaul (16 Jun 2016)

Firefly said:


> I was thinking about this again last night. VW seems to be the biggest player and I'm thinking they introduced these deals in the wake of the emissions scandal as a way to keep car sales going. Then, seeing the success / increase in market share by VW, other brands have jumped on the bandwagon, quite similar to the housing boom where banks were giving 100% mortgages. I heard an advert for the Dacia Sandero in Cork yesterday - no deposit and 50e a week.
> 
> Of course when the intial period expires, a lot of people will simply roll-up to another car. Even if the equity carries on for them by getting a decent deal, who is to say that the finance for the 2nd and subsequent cars will be at such favourable rates as they are now?



VW may have been one of the first to introduce PCP but it had nothing to do with the emissions scandals. PCP's have been around for a good while in the UK and it was only a matter of time before they were introduced here. Allied to the fact that the car industry needed something to kickstart their sector after the recession and it has worked spectacularly for them in the short term.

The proof will be in the pudding in a couple of years when the real affordability of the car will be tested by buyers when it comes to debt settling and reconciliation. Personally I don't like PCP's as they are too restrictive in terms of mileage and bumps/scrapes etc. I don't think I would ever consider a car purchased on PCP as 'mine', only leased from the manufacturer which this is in essence.


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## Ceist Beag (16 Jun 2016)

I can certainly see the benefits of PCP for dealers.
1. Pretty high chance of repeat business every 3 years so increased customer loyalty
2. Ongoing service business as customers are tied in to having car serviced by dealer by the PCP contract
3. Should the car not be in pretty perfect state at the end of the 3 years it is not the dealer who is at a loss.

I don't really see the attraction for customers tbh. You're effectively leasing the car for 3 years with a commitment to getting the car serviced by the dealer and should anything happen the car then all bets are off as far as the benefits of the package go, so you're carrying the risk on that.
As tallpaul said, time will tell who is getting the better deal here but right now it looks like the dealers are the ones with by far the better of it.


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## Leo (16 Jun 2016)

Ceist Beag said:


> 2. Ongoing service business as customers are tied in to having car serviced by dealer by the PCP contract



Not the case with all makes. 



Ceist Beag said:


> I don't really see the attraction for customers tbh.



Main attraction I see is the flexibility when the 3 years is up. If you have significant life events on the way like marriage, kids, house moves, etc., you might like the flexibility of financing some of the price up front, then having the option of walking away, paying it all off in a lump sum, or rolling the deal over. If you don't need that flexibility, then you'll be a little better off just going for a straight finance deal, presuming the interest rates match.

PCPs are definitely geared towards encouraging a regular turn-over of new cars, and a steady supply of 3 year old second hands in good condition, but you don't have to play the game entirely on their terms.


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## Ceist Beag (17 Jun 2016)

As a second hand car buyer it certainly sounds good to me anyway to have a regular supply of stock coming onto the market!


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## Firefly (17 Jun 2016)

Ceist Beag said:


> As a second hand car buyer it certainly sounds good to me anyway to have a regular supply of stock coming onto the market!




And all at same time!


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