WDB
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Residuals
Sept 14, 2023 9:53:33 GMT
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Post by WDB on Sept 14, 2023 9:53:33 GMT
Talking for the first time in a while to dealers in their preferred language of PCPs has made me wonder about — or at — the effect of Recent Events on the value of slightly-used cars.
I don’t have many concrete examples, but the final payment on each i3 PCP has been set at about 40 percent of the cash price. That, I’m sure, was calculated to create the moment in Y4 when the finance manager could point out that I had ‘equity in the vehicle’ and would I like it to roll it over into a new agreement?
The more recent examples I’ve had set the final payment at more like 45 percent, which seems optimistic for a four-year old car — but maybe that just shows my expectations are out of date. In monthly payment terms, a higher residual ought to offset the effect of a higher interest rate — although not the total cost of acquisition, which is what concerns me. Total cost of ownership might be a different proposition again, if these higher residuals extend to six- and eight-year-old cars too.
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Residuals
Sept 14, 2023 10:03:06 GMT
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Post by Humph on Sept 14, 2023 10:03:06 GMT
Really tough one to call isn’t it. Looking at how volatile the market has become.
Theoretically, an EV could do better as legislation looms ever closer on ICE vehicles. Or, will technology advance so rapidly that today’s cars quickly become old?
I wouldn’t be confident to forecast anything at present.
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Deleted
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Post by Deleted on Sept 14, 2023 10:31:04 GMT
Yes, I'm feeling the effects currently. With the PCP on my first Leaf, there was very much "equity" in the car at the end of the contract, which allowed me to roll into a newer car without any extra cash input, or any change to my monthlies. This is now not going to be the case with my current Leaf, on which I have a year left. I will probably have negative equity next year, given it is currently valued at the level of my final payment.
So my decision will have to be "find the money, pay it off and run the car into the ground", or hand it back.
In fact I've just sent off an enquiry to the finance firm to check if I am in a position where I could hand the car back now and terminate early. If I am, I will consider handing it back, and trading the Civic in for a (probably) 64kwh, 300 mile range Hyundai Kona, using part of the value of the Civic as a PCP deposit, and the rest of it to buy a £4/5k estate car outright.
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Residuals
Sept 14, 2023 10:46:18 GMT
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Post by Humph on Sept 14, 2023 10:46:18 GMT
I really am super old fashioned about these things. I know there are strong arguments for PCP or other deferred cost arrangements, but I just prefer to buy something I can afford with money I have rather than kick it all down the road.
I think it stems from a time in my life when I didn’t have a regular income but did have feast or famine years.
Always been the same really, if I can afford something and I want it, I’ll buy it. If I can’t afford it and want it, I’ll save up until I can or do without it.
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Deleted
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Post by Deleted on Sept 14, 2023 10:48:19 GMT
House?
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WDB
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Residuals
Sept 14, 2023 10:51:01 GMT
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Post by WDB on Sept 14, 2023 10:51:01 GMT
Completed your Humph Bingo card already?
😛
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Residuals
Sept 14, 2023 10:51:17 GMT
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Post by Humph on Sept 14, 2023 10:51:17 GMT
That was the exception of course, but even with that I got my mortgage cleared way earlier than its original term.
And, I’m more comfortable with an appreciating asset on tick than a depreciating one.
Horse and courses of course.
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WDB
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Residuals
Sept 14, 2023 10:52:33 GMT
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Post by WDB on Sept 14, 2023 10:52:33 GMT
Horses have a way of depreciating really quickly. Often into glue.
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Deleted
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Post by Deleted on Sept 14, 2023 11:03:36 GMT
I really am super old fashioned about these things. I know there are strong arguments for PCP or other deferred cost arrangements, but I just prefer to buy something I can afford with money I have rather than kick it all down the road. I think it stems from a time in my life when I didn’t have a regular income but did have feast or famine years. Always been the same really, if I can afford something and I want it, I’ll buy it. If I can’t afford it and want it, I’ll save up until I can or do without it. I've saved significant money over the last 6 years by financing my EVs cheaply, when the cost of that is balanced against running vehicles I could have bought outright - i.e. older diesel/petrol cars. |
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Residuals
Sept 14, 2023 11:05:20 GMT
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Post by Humph on Sept 14, 2023 11:05:20 GMT
Fair enough, people should do what works for them of course. It’s an attitude thing with me I suppose. If I’ve paid for something it’s mine sort of thing.
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Post by EspadaIII on Sept 14, 2023 11:08:26 GMT
We do have to remember that a good reliable ICE, preferrably Euro 6, will be permitted to run almost unrestricted, for the next 20 years. As manufacturers start to replace ICE with EV and the number of new ICE on the road decline the remainder will improve their value.
The best car you want is the modern equivalent of the 1992 Honda Accord. It will run forever if serviced correctly.
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Deleted
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Post by Deleted on Sept 14, 2023 11:08:53 GMT
Fair enough, people should do what works for them of course. It’s an attitude thing with me I suppose. If I’ve paid for something it’s mine sort of thing. Yes I get that. All works out the same in the long run though, and what's the worst that can happen? The car goes back. So I've had use of it for however long, and only paid for that use. Might actually be a bit less risky than spending big chunks of cash on something. |
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Residuals
Sept 14, 2023 11:20:59 GMT
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Post by Humph on Sept 14, 2023 11:20:59 GMT
Not knocking it really. If seems to suit a lot of people so I’m happy to be wrong/different. Like I say, it’s probably a hangover from when there were times when I simply couldn’t have kept up with monthly payments punctuated by times when I could have bought cars outright.
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Deleted
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Post by Deleted on Sept 14, 2023 11:26:59 GMT
We do have to remember that a good reliable ICE, preferrably Euro 6, will be permitted to run almost unrestricted, for the next 20 years. As manufacturers start to replace ICE with EV and the number of new ICE on the road decline the remainder will improve their value. The best car you want is the modern equivalent of the 1992 Honda Accord. It will run forever if serviced correctly. 2016 Honda Civic Tourer 1.8 i-VTEC petrol then. |
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Residuals
Sept 14, 2023 11:30:56 GMT
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Post by Humph on Sept 14, 2023 11:30:56 GMT
Could be!
Although, I’ll be amazed if liquid fuel isn’t both taxed to infinity and beyond or becomes difficult to obtain as forecourts close in that period.
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