It did.

For anyone with even a basic grasp of economics, that "no more return to boom and bust" was the stupidest thing anyone has ever said in recorded history.

What we have here is a 60 year economic cycle bust. Not everyone believes in long-wave theory, fair enough; but the indicators were there and clearly a blind eye was turned by everyone. Crowd psychology means it is too easy to get swept along in the euphoria, for fear off missing out. This probably explains why the 'rational production' so favoured in the 1980s has been overlooked for some sort of anti-rationalisation mayhem of late.

There are too constants; we never learn from history and there's no tomorrow...

 

You are right about customers on existing PCP deals.

But, PCP is here to stay for many of the reasons that I have mentioned. 'Point of sale' finance i.e. finance sold by the dealer increased by 6% in 2008 which shows how tough it is for the consumer to get funding from other sources.

But, people will still want new cars. Even though I believe that car buying will probably remain at lower level than before as people finally realise that cars do last more than 2-3 years I also believe that the motor trade will recover in 2010 as we all begin to exit the recession.

Finance really remains the only viable option for the vast majority of people buying a car, new or used. Since point of sale is secured on the vehicle, it's relatively safe for the finance company if they get their residuals right. Underwriters are not going to forget how bad it is now, and I am sure that through new T&C's and higher end of term values they will make PCP work.

Most of the motor finance companies have found it difficult to get lending, I even heard one major manufacter's finance company tell me that they were being offered

 

Interesting stuff Moff.

I think my view on quarterly reporting is skewed, I've been in the same company 10 years, it always was this way here, but wasn't the last time I worked for a British company. I can well believe it's gone the same way elsewhere. Very poor situation to be in, but the shareholders don't take the long view like they used to, and the companies have to please the shareholders so.....

Anyway, vehicle financing....

Assuming PCP is here to stay I can't see it being the sales tool it was. How many people will continue to stay in the same or equivalent car at the end of their current term?
I suspect not many.

How many will shy away from the worse deal they're offered (higher monthlies and a lower guaranteed value on the same car they've just handed back) and buy up one of the the thousands of 3 year old ex-PCP cars at auction with what they would have used as deposit for the next PCP?

Even if they are offered a PCP, I doubt it will be as attractive as the last one they had, so I guess it then comes down to how much they want the new car. Or whether they're prepared to go without leather, 18" wheels and air con perhaps.
The alternative would be to take a 4 or 5 year deal for the same monthly payments in order to have the same car, meaning they're off the new car market for another year or two longer than they traditionally would have been.

If so that doesn't bode well for the longer term prospects of the car industry as traditional new car buyers opt out of what has recently been a very effective sales tool for the manufacturers, and those that continue to buy new either opt for longer terms or don't buy the extras (traditionally a good source of profit for manufacturers).

Which is why I feel the whole recession is going to be longer and more severe than a lot of commentators expect - I just don't see how the UK can go back to spending at the levels we have for the last 5 years for a long time to come - credit will eventually be available, but at a reduced level and at a greater cost which means consumers will not be able to spend as freely as they did.

That's assuming of course that we don't end up in hyper-inflation once Gordon starts printing money (whether he calls it quantative easing or robbing the bank of monopoly, it amounts to devaluing sterling even further) which is entirely possible, they even those with cash reserves won't be able to buy as much, prolonging things even more.

Scary stuff.

 

...which is one reason I'd talk about stabilisation by 2010.

Recovery will be a bit of an exaggeration.

 

Mark - remember PCP is not just for new cars. It's an excellent tool for buying a nearly new used car that has already taken a hit in depreciation. I bought my wife's used car on PCP - and assuming you do the sums and get a good deal and can work really well.

Cars do not sell well at auctions - people are too scared - no warranty, no dealership backing. The used market will improve in 2009/10, due to the reasons that you have mentioned - there are loads of cars out there due to a) over production b) voluntary terminations from PCP/HP deals.

Assuming that the funding is available, PCP deals won't be to hard to finance. Remember, with new car deals, the manufacturer subsidises the finance to ensure new car sales, and they make PCP deals even more attractive.

As with house buying, it's going to be tough to get a mortgage without a decent deposit for the next couple of years, the same will be true for vehicle finance.

There will be a wholesale shift in the types of cars purchased, with many downsizing during the lean times, but I am sure that the manufacturers will devise new ways to sell their cars - they will have to.

Even if buyers do have to downsize their purchase, I think many will still opt for the protection of a PCP deal. I am still surprised how many will walk into a dealer and not even haggle the price of the car, the monthly finance charge, and extras... I thought people were beginning to learn?

I agree that it's going to be a slow recovery from recession, we are no where near the bottom yet. Outside of the car market is a whole other story. I am just glad that the government is starting to take notice of the automotive industry instead of just the banks, there are 100k's of jobs at risk in this sector too.

 

True. Trouble is, the problem is likely too big for poxy little gov'ts to deal with.

The attractiveness of fixed-payment PCPs, together with smaller environmentally-friendly (ugh! But it's a way of justifying an Insight replacing the X5!) clever cars - IQ, anyone? is how to deal with the downturn.

Bottom line is the bottom line; the companies that can self-finance will continue to sell. Those that rely on banks or other accursed moneylenders, shall be doomed.

 

No: the government has helped already, but it isn't going to work until the banks have filled their coffers enough that they're happy to lend to people against their own security, and restore their profit margins. The only way that the profit margins are going to be restored is when supply meets demand and efficiencies are found; which unfortunately means that around 30% of the economy will need to go to the wall to return to 2007 figures, given current demand.

There's no way I'm suddenly going to buy a car just to prop up the economy. There has to be a damned good reason to do so (e.g., my old one's died; the governments increasing road tax ten-fold; petrol is more expensive than LPG).

The short-termist views of shareholders and investors IMO harks back to the Thatcher years. Joe Public wants to be better off. First, I'll own my own home, then make money as its price rises without doing anything. Oh, that all went pear shaped in 1990. Ok, so how else did people make money in the 80s? Investing. I'll try the stockmarket then... And then the people who should've known better (high flying Merkin bankers) mess it all up for a quick buck, and because the risk pot isn't big enough any more.

There's been too many amateur investors trying to make a lot of money who don't know what they're doing. Joe Public taking on risk for potential rewards without fully appreciating the potential penalties.

I'm going to restate my theory: Either it'll all go "Star Trek", and money will no longer exist and "The acquisition of wealth is no longer the driving force; we work to better humanity." (perhaps some kind of religious renaissance is due?!) or it'll return to the same invidivualistic market driven forces and boom and bust again.
Greed is good, according to Gordon Gecko...

Now, how do I make a buck out of that?

 

So the question for the car manufacturers is.....

Which ones will adapt and survive, which won't and end up like the dinosaurs?

Do you know, the more I think about their business model up to now, the more I wonder how BMW are going to survive a drawn out recession.

Iso Rivolta Isetta anyone?

Useful - that's the million dollar (well, 800 billion dollar) question, what's going to be at the end of all this?
Unfortunately I think the world order won't change that much, maybe some new people at the top, perhaps even a new superpower (China) but people will remain the same, we all like something for nothing, and we all like to think we're smarter than the next bloke.....

 

If you farq it up first time around, make it bigger!

More of the same ol', apparently! Maybe if it turns out closer to the E30, it won't feel so damned claustrophobic... But the footprint increase will negate all but the most radical weight-saving.

Having said that, there IS rumour that the Isetta is being revived by BMW. Whether it shares a front engine with the Mini Minus (yet another Mini, but also not so stupidly huge and space-inefficient as the One and Cooper and ****ryman 4X4!) is a moot point.

 

PS: The balance of power will swing eastward; it's as cyclical as everything else man does, yet thinks he's the bollocks for just inventing it! Imagine the USA as grumpy as Russia was...