Six Cylinders Motoring Notes

[RichardK]

1 hour ago, Talbot said:

So the monthly payments must be more than the depreciation value of the car.

They have to make their money somewhere.

I simply cannot believe that the initial buy-in price + all montly payments + final payment can be less than the cash price of the car.

It quite often can be. Usually there are incentives and discounts.

We do a whole load of research on this at Parkers - and trust me, you're not talking to someone who likes or WANTS to support new cars, I learned this a long time ago that leasing/PCP cars is often cheaper than running or financing old cars, particularly that awkward 5 to 7 year old window where the car is still worth enough to finance, but the repairs are coming in thick and fast.

APR wraps it all up. They make the money on the car itself. It has a profit margin. Old-school thought; IIRC the material cost difference between an Audi 100 or 200 (or 80 and 90) in the '80s was 100DM, but they could charge 1500DM more; this applies even more now as people will choose a GLA over an A-Class, an XC over a V, etc. and yes, monthly payments, but it's still MORE.

Also the car manufacturers are finance companies.

You will often (if you have good credit) get a lower APR on a PCP - and a cash discount on the car via incentives - and if you want to push that further you can always sell your car at the end and pay the PCP off.  But it has to run all the way through. Depreciation isn't linear - sell after a year and yes, you will owe more than the car is worth. That's why two year lease deals are often worse unless the cars are troublesome stock.

Depreciation is always measured against list price. My C6 was £38,000 list. What I actually paid was £28,000 for 15 mile pre-reg, minus £4,000 dealer incentive, minus £2,800 trade-in offer for a 2004 Ignis that I'd paid £800 for. These sorts of deals are quite common - hence all the brokers. £9,000 off a C-Class or E-Class isn't unusual. They were bashing out Renault Zoes for £9K a couple of years back,

But ultimately no, there is no trap, no trick, no 'making their money somewhere' - they sold a £40,000 asset with a profit margin on a finance deal that in up-front payment, monthly cost and residual value calculated to be less than the value of the car at the end of the finance term, adds up to the value of the asset plus interest payments

[RichardK]

13 minutes ago, New POD said:

Without getting into the PCP argument, I've always thought that if you manipulate the list price, so that the depreciation looks even worse, and the monthly payments look reasonable, the second hand value of the car after 3 years might actually be what the price should have been.  Given that lease companies buy in bulk, or are tied into the manufacturer, or are the manufacturer, we really don't know how much they paid for the car.  

My daughter is actually prime target for PCP.  

The reason she doesn't? She wants to buy a house and having anything on finance would screw up the figures on how much she could borrow.  

 

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

Brokers give a hint as to the cost price of the car. £14,000 for a £21,000 Nissan Qashqai or Juke type thing isn't uncommon. Most things you manufacture you want a 30-40% margin on and the car industry is no different; Nissan are actually operating on tighter margins for greater volume. Ferrari recently discussed their profit margins and you can bet they're running a MUCH higher level of profit to COGs, probably 70-80%, but then they sell relatively few cars.

But loss leaders exist - JLR are particularly 'good' at it, when the £50K (in any spec you'd want) Velar launched they were on lease from brokers for £350/month - now they're more like £600/month with heavier deposits (most leasing is still 3, 6 or 9 months up front as first payment depending on the deal, though some brokers are now just using a flat number unrelated to monthly cost). Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the roads to get the cars seen.

[SiC]

1 hour ago, RichardK said:

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

While that is true, what I think newpod is referring to is the affordability calculation. Car finance, like any other major outgoing, is dug out of your earnings and that's is a major factor on the calculated max you can borrow (4 to 5 times combined earnings). They also stress test finances to see if you can still afford the monthly repayments on a mortgage if interest rates went up to a high percentage (calc around 5% iirc) after a deal ends. Thus the amount you can borrow is reduced if you have a lot of outgoings. 

But of course this is only really a problem if you're borrowing nearly max what the bank will offer. Which is likely a risky personal situation if they did, given the amount banks will still potentially lend. 

[Six-cylinder]

1 hour ago, RichardK said:

Depends on the finance. If she wanted a new car and leased it, it doesn't show as a debt in the same way - the payments are ticked off, but there's no liability shown for the full value of the car, unlike a PCP where everything (including the balloon) is a finance liability. And as always, well-managed credit = more creditworthiness.

Brokers give a hint as to the cost price of the car. £14,000 for a £21,000 Nissan Qashqai or Juke type thing isn't uncommon. Most things you manufacture you want a 30-40% margin on and the car industry is no different; Nissan are actually operating on tighter margins for greater volume. Ferrari recently discussed their profit margins and you can bet they're running a MUCH higher level of profit to COGs, probably 70-80%, but then they sell relatively few cars.

But loss leaders exist - JLR are particularly 'good' at it, when the £50K (in any spec you'd want) Velar launched they were on lease from brokers for £350/month - now they're more like £600/month with heavier deposits (most leasing is still 3, 6 or 9 months up front as first payment depending on the deal, though some brokers are now just using a flat number unrelated to monthly cost). Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the roads to get the cars seen.

Nothing has really changed from the 1990's when I sold new cars on PCP. We would be able to offer manufacture incentivised specific cars from time to time with special rates.

When no new deal PCP and business lease vehicles were returned we had to inspect them for damage. We were give a book with pictures of what was acceptable for different age and mileage cars. It was not very often that a car came back without some sort of charge, does that still happen? Is it more usual minor damage is taken into account in the p/x price for a new deal, be it with the same manufacture or a different one.

On PCP if you go over mileage is that always a charge to be paid or does it get taken into account in the p/x price if a new deal is being signed? 

[RichardK]

47 minutes ago, Six-cylinder said:

Nothing has really changed from the 1990's when I sold new cars on PCP. We would be able to offer manufacture incentivised specific cars from time to time with special rates.

When no new deal PCP and business lease vehicles were returned we had to inspect them for damage. We were give a book with pictures of what was acceptable for different age and mileage cars. It was not very often that a car came back without some sort of charge, does that still happen? Is it more usual minor damage is taken into account in the p/x price for a new deal, be it with the same manufacture or a different one.

On PCP if you go over mileage is that always a charge to be paid or does it get taken into account in the p/x price if a new deal is being signed? 

You still get charged for damage if handing the car back, but excess mileage and damage are all taken into account in a new deal, same as negative equity if you change early (as I did with my C6 to the C3).

If you've any sense, you won't get burned. If you hand a car back at three years old with the seats trashed, panels dented and a cracked windscreen because you CBA getting it replaced on insurance, then you're going to pay - but then again,  the car would also be worth less to a buyer anyway. People seem to have a disconnect between value/condition/time where cars are concerned... and its understandable, but a lot of what seems to be negativity towards PCP is what most of us would call 'consequences of actions' and not an inherent flaw in the model of PCPs.

Most leases will allow a few stonechips (per panel it's usually a couple) and even a small stonechip on the windscreen, but damage is damage. You wouldn't pay top whack for a three year old car with a dent on the door, after all.

I've never had a charge for damage on a lease or PCP car, and my RX8 had two MASSIVE stonechips including one on the roof with a dent in it, my Beetle was leaking and had had a sill repaired, and my Fullback had been reversed into and had an insurance repair (amazing job - I couldn't tell) on the rear 1/4.

[New POD]

2 hours ago, SiC said:

While that is true, what I think newpod is referring to is the affordability calculation. Car finance, like any other major outgoing, is dug out of your earnings and that's is a major factor on the calculated max you can borrow (4 to 5 times combined earnings). 

Applying for a residential mortgage is interesting, these days.  Your spending habits are interrogated, and they look at all your fixed commitments and your "lifestyle" expenses.   And so similar people doing the same job on the same salary might find their mortgage borrowing  limits are different. 

She studied in Wales but as she's from England she has a bigger student loan than most of the people on her course. But they all have to pay it back at 9% of any salary above £26750.  This costs her £30 a month. 

Think about that.

£6000 at say 6% (assume for the purposes of a stress test that interest rates could rise by 3%) costs £30 a month. 

That £45k student loan should reduce the amount she can finance by approximately £6000 

If you have a £500 phone on contract that costs £30, there's another £6000 less, you can borrow. 

If you have a £10k car on a PCP contract costing £200 a month, that should limit your ability to borrow £40k 

But if you paid £10k cash, you have just spent your 10% deposit on a £100k loan. 

Hence her spending £3000 on a KA.

As an aside: When we took out a second mortgage in 2019, we downloaded all our spending from all our accounts and credit cards and it was shocking how much we spent on luxuries and presents and meals out.  And worse was the visits to the cash point with no record of what we'd spent or why.  It shocked my wife more than me.  It changed our spending habits. Mine. I try not to use cash. Then at least I know where I spent it. 

[RichardK]

[wuvvum]

6 hours ago, RichardK said:

Some could say this disparity is down to depreciation calculation, but by that reckoning Evoques should be one of the cheapest cars to lease; it's dumping stock onto the hard shoulders to get the cars seen.

EFLand Rover.

The company I work for offers a lease scheme (via a third party provider) which is all inclusive (insurance, servicing etc) and the lease payments are taken from your pre-tax salary.  Some of the offers are quite attractive, but my concern is that it would have a similar effect on my ability to borrow should I ever be in a position to buy a place - although the lease payments won't be counted as a debt, the payments being taken "at source" will effectively reduce my salary by 300 quid a month or whatever, and thus reduce the amount I am able to borrow - which as it is will only buy a 2-bed flat in Norwich, or a 4-bed mansion in Yarmouth between a Lithuanian brothel and an Albanian drug den.

[outlaw118]

7 minutes ago, wuvvum said:

a 4-bed mansion in Yarmouth between a Lithuanian brothel and an Albanian drug den.

So when are you moving?

 

[Six-cylinder]

I got my MX5 back yesterday with a fresh MOT and serviced.

Last year in storage had killed the battery and after a 20 mile drive it was still flat so I had to ask for a new one to be fitted. Unfortunately a bit of welding was necessary at the back of the nearside sill. They also welded the exhaust but tell me I really needs a new one. Changing the oil has not cured the tick from the engine on cold start up. My favourite garage tell me the old oil looked like new anyway and while it has been in there 2 years has only done 1,000 miles.

I took it shopping yesterday and as ever is great fun to drive even if I am a whim and did not lower the roof.

[SiC]

8 minutes ago, Six-cylinder said:

Changing the oil has not cured the tick from the engine on cold start up

The Wynns Valve Lift Treatment did wonders on mine to quieten them. 

[wuvvum]

Yep, that stuff is one of the few "snake oil" cures (along with the Lucas power steering stuff) that actually seems to do what it says on the tin.  Worked wonders for the tappet noise on my first Stagea.

[Six-cylinder]

Carlton parts came in today, just the oil filter to go.

[richardmorris]

1 hour ago, Six-cylinder said:

Carlton parts came in today, just the oil filter to go.

Have I missed a head gasket failure in the thread?

[Six-cylinder]

2 minutes ago, richardmorris said:

Have I missed a head gasket failure in the thread?

Page 293 Sunday 10:07 pm

[beko1987]

3 minutes ago, richardmorris said:

Have I missed a head gasket failure in the thread?

Their probably in double digits now...

[richardmorris]

6 minutes ago, Six-cylinder said:

Page 293 Sunday 10:07 pm

Ah yes, i was dealing with a panda infestation,

[Six-cylinder]

I am looking for a front wiper motor for our Citroen XM?

My garage says it is getting power but all functions only work when they feel like it and they have asked me to find a replacement motor.

1997 XM 2.0 16v auto RHD.

Has anybody got one they can sell me?

[Floatylight]

25 minutes ago, Six-cylinder said:

I am looking for a front wiper motor for our Citroen XM?

My garage says it is getting power but all functions only work when they feel like it and they have asked me to find a replacement motor.

1997 XM 2.0 16v auto RHD.

Has anybody got one they can sell me?

Has @chaseracer still got access to a pile of bits?

[chaseracer]

No, but I believe I do still have the wiper motor!

[dean36014]

11 hours ago, Six-cylinder said:

I am looking for a front wiper motor for our Citroen XM?

My garage says it is getting power but all functions only work when they feel like it and they have asked me to find a replacement motor.

1997 XM 2.0 16v auto RHD.

Has anybody got one they can sell me?

Warranty expired? 

[Six-cylinder]

16 minutes ago, dean36014 said:

Warranty expired? 

You knew I was thinking about making a claim, only 2 years and it has broken already. 

[Six-cylinder]

10 hours ago, chaseracer said:

No, but I believe I do still have the wiper motor!

Have you found it?

[dean36014]

8 hours ago, Six-cylinder said:

You knew I was thinking about making a claim, only 2 years and it has broken already. 

Bloody terrible seller you bought it off, definitely not to be trusted😁

[Six-cylinder]

A plan is coming together to take the head off the Carlton tomorrow (Sunday) morning with @Talbot.

If anybody wants to come along to the FoD and help/witness the event then please pm me.

[chaseracer]

11 hours ago, Six-cylinder said:

Have you found it?

Been on/in/under the race car all day, but I'll pull the Dyane out of the garage in the morning and track it down.

[Six-cylinder]

1 minute ago, chaseracer said:

Been on/in/under the race car all day, but I'll pull the Dyane out of the garage in the morning and track it down.

Thanks

[hairnet]

On 4/9/2021 at 9:20 PM, richardmorris said:

Ah yes, i was dealing with a panda infestation,

thats one way to avoid a speed camera :D

chris i was thinking about it but sunday trains with no notice although found a super off peak 28 quid return from crewe (the normal ones from here are 76) - it means

riding to crewe

train wouldnt get to mk till 1200

pheh

[Six-cylinder]

8 hours ago, hairnet said:

thats one way to avoid a speed camera

chris i was thinking about it but sunday trains with no notice although found a super off peak 28 quid return from crewe (the normal ones from here are 76) - it means

riding to crewe

train wouldnt get to mk till 1200

pheh

pheh?

[Heidel_Kakao]

3 minutes ago, Six-cylinder said:

pheh?

It's probably the Hairnut equivalent of a meh.