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About 85% of new cars 'sold' in the UK are either PCP or Hired Purchase[0]. Anecdotally, it's really apparent amongst my peers; many are driving new (less than

About 85% of new cars 'sold' in the UK are either PCP or Hired Purchase[0]. Anecdotally, it's really apparent amongst my peers; many are driving new (less than two years old) BMW, Audi and Mercedes that would probably cost a whole years wage or more outright. Luckily, for people like me who buy almost new for cash, this is a good thing. [0] http://uk.businessinsider.com/statistics-uk-bank-exposure-pcp-car-finance-debt-2017-7 http://uk.businessinsider.com/statistics-uk-bank-exposure-pc...

ZeroGravitas 9y ago
I've noticed this same thing, but don't quite follow the logic fully. Like, why don't they just PCP or Hire Purchase a cheaper car. They'd get whatever benefit the PCP provides, and spend less money. What about the PCP convinces them (rightly or wrongly) that they can afford those cars? There's so many people doing it I feel I must be the one that is wrong, and there's some tax dodge or something they are taking advantage of.
- bengale 9y ago
  Maybe they just want a nicer car?
  - ZeroGravitas 9y ago
    Everyone wants a nicer car, but usually there's good reasons why they haven't bought one. It seems like something has shifted recently and many people have cars nicer than they would have previously. Possibly nice cars are just cheaper, or everyone is richer or people can get credit for cars where before they couldn't. It might just be me, I thought people spent too much on cars anyway, and now they seem to have nicer, newer cars, so I assume they're spending even more, but as a non-car guy maybe that only seems weird to me.
    - njarboe 9y ago
      As interest rates keep getting lower and auto loan terms now as long as 7 or 8 years. In 3 years, when the people that got those long loans want a new car, they will find their car loan still underwater. They will likely have to stick it out with their "old" car for awhile.
    - neilwilson 9y ago
      It's a straightforward effect of financialisation. It's because you get the benefit of the part exchange value of the car in three years time now, rather than in three years time. That simple discounted present value trick allows you to have a nicer car the first time you get on a PCP plan, because it lowers the total amount of credit on that plan vs the alternative.
- ProblemFactory 9y ago
  There is no secret trick or advantage to it. They buy the nicest car they can (barely) afford the monthly payments for, not one that makes most financial sense. > What about the PCP convinces them (rightly or wrongly) that they can afford those cars? At the end of the PCP plan, you don't get to keep the car (it's more of a rental than a purchase). Therefore the monthly payments on a 3-5 year PCP are going to be lower than on just a loan for the full price of the car. That makes it more "affordable" to people than actually buying a car - and the issue of what to do in 3 years time, when you will have no car, is conveniently forgotten.

ZeroGravitas 9y ago

I've noticed this same thing, but don't quite follow the logic fully. Like, why don't they just PCP or Hire Purchase a cheaper car. They'd get whatever benefit the PCP provides, and spend less money. What about the PCP convinces them (rightly or wrongly) that they can afford those cars? There's so many people doing it I feel I must be the one that is wrong, and there's some tax dodge or something they are taking advantage of.

bengale 9y ago
Maybe they just want a nicer car?
- ZeroGravitas 9y ago
  Everyone wants a nicer car, but usually there's good reasons why they haven't bought one. It seems like something has shifted recently and many people have cars nicer than they would have previously. Possibly nice cars are just cheaper, or everyone is richer or people can get credit for cars where before they couldn't. It might just be me, I thought people spent too much on cars anyway, and now they seem to have nicer, newer cars, so I assume they're spending even more, but as a non-car guy maybe that only seems weird to me.
  - njarboe 9y ago
    As interest rates keep getting lower and auto loan terms now as long as 7 or 8 years. In 3 years, when the people that got those long loans want a new car, they will find their car loan still underwater. They will likely have to stick it out with their "old" car for awhile.
  - neilwilson 9y ago
    It's a straightforward effect of financialisation. It's because you get the benefit of the part exchange value of the car in three years time now, rather than in three years time. That simple discounted present value trick allows you to have a nicer car the first time you get on a PCP plan, because it lowers the total amount of credit on that plan vs the alternative.
ProblemFactory 9y ago
There is no secret trick or advantage to it. They buy the nicest car they can (barely) afford the monthly payments for, not one that makes most financial sense. > What about the PCP convinces them (rightly or wrongly) that they can afford those cars? At the end of the PCP plan, you don't get to keep the car (it's more of a rental than a purchase). Therefore the monthly payments on a 3-5 year PCP are going to be lower than on just a loan for the full price of the car. That makes it more "affordable" to people than actually buying a car - and the issue of what to do in 3 years time, when you will have no car, is conveniently forgotten.