When is the pricing bubble going to burst?
- Thread starter Temujin
- Start date
This. All the cars I was considering to order back in May are now all up to 10% higher list price with less kit on as standard. Thats high end luxury suvs.
I don't think there will be a burst bubble, more a gradual deflation. So kind of like of one of those helium balloons kids bring home from parties and sit in the dining room gradually shrinking over a long period rather than going BANG like a traditional balloon that sat next to a radiator.
For a bubble-bursting scenario, you need some sort of shock factor to impact the market like a huge increase in fuel prices, significant tax/legislation change implemented at short notice, or a glut of supply occurring at short notice. The latter two certainly aren't going to happen at least and there has never been a huge increase in fuel prices.
Most items depreciate in value. So, given that people buy items that depreciate, it then becomes about what is the most cost-effective way to pay for those items. In some cases this will be via a mortgage.
For a bubble-bursting scenario, you need some sort of shock factor to impact the market like a huge increase in fuel prices, significant tax/legislation change implemented at short notice, or a glut of supply occurring at short notice. The latter two certainly aren't going to happen at least and there has never been a huge increase in fuel prices.
To get an item they otherwise might not be able to get now and/or to get it at a cheaper price.
Most items depreciate in value. So, given that people buy items that depreciate, it then becomes about what is the most cost-effective way to pay for those items. In some cases this will be via a mortgage.
Why would you still want to be paying back on a car you've long got rid of in 15-20 years time? Over the course of a typical 25 year mortgage houses tend not to depreciate unless you're extremely unlucky. The only way it's cost effective is in the monthly repayments, you'll end up paying more in the long run.
You can borrow money for any duration you wish regardless of the security…you seem to ignore this. Personally I think that finance for something as menial as a car is something that I will never understand, but if you must then via a mortgage is very likely to be the cheapest option - so much so that any other route seems stupid.
I realise that you can get further advances on a mortgage, but often these are still taken out over a longer period to keep costs down. I would counteract your argument by stating that financing a depreciating asset with a secure loan is in fact stupid, especially when relatively attractive non-secured loans are available elsewhere.
When you take additional mortgage borrowing, a second account is added to the mortgage. You can have individual mortgage accounts covering different periods and they can be as short or long as you like as long as they fit within your affordability envelope and well you aren’t too old.
It’s your assumption is that people will just take it over a longer period but there isn’t actually a need to.
It’s your assumption is that people will just take it over a longer period but there isn’t actually a need to.
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Why do you keep mentioning the fact it's a depreciating asset? I'm not sure I understand why this makes any difference when selecting which ever financing option results in the lowest interest payments?
Any loan can be taken over any period, a personal loan can be extended by re borrowing, the duration is not relevant to this discussion.
Re the asset class/purpose; this is not relevant at all. It wouldn’t matter if the purpose of the loan was to create a nice fire of pictures of the queens head, the aim is to borrow at the lowest overall cost. Save for manufacturer subsidised schemes, it is unlikely that any normal consumer will do better than securing against a property.
Surely this depends on numerous other relevant details such as product fees, length of fixed rate, variable rate % once the headline rate has finished, LTV, customers credit file? Maybe it's just me, but I just wouldn't be comfortable in taking out a secured loan for something that's not going to add value to my property.
This is the same as saying that you wouldn’t be comfortable in taking out any form of loan for something that will not add value to your property. I completely agree with this.
What isn’t relevant is what this loan is secured against - you will be forced to repay an unsecured loan just as well as a secured one!
a) You don't have to be paying it back in 15-20 years time. The last mortgage I took out was a 7 year term. You could, depending on the product, make early repayments to bring the balance down to the level it would have been had you not taken the extra finance for the car, etc.
b) You only end up paying more in the long run if you don't pay it off quickly (see above) and/or you let the interest rate rise. You might pay less than on a personal loan, I mean I could turn this argument on its head and say why would anyone want to take a personal loan at 2.9% or whatever to pay for a car if they could get cheaper finance via a mortgage? I appreciate the numbers might not stack up for everyone, but they do for some people.
c) The fact you may be long rid of the car by the time you pay off the loan isn't relevant in my eyes, it's all about getting the best deal. For some people borrowing more on a mortgage gives the best deal
Me personally, I wouldn't borrow money from anywhere to buy a car unless it was interest free credit and/or there were incentives for taking out finance (we bought our current car on finance to get a deposit contribution then paid it back a few weeks later to avoid nearly all the interest). But if I was going to take out finance for a car, I certainly wouldn't dismiss mortgage as an option.
Speaking to a car dealership manager friend of mine, he thinks the crash is incoming. When prices were going up his forecourt/pitch was about 15% full. As a main dealer they couldn’t get new or second hand cars. I went to see him for lunch and the inside of the dealership was barren, and every car on display bar a tiny few were already sold.
He reckons they are back up to their pitch being around 80% full.
He reckons they are back up to their pitch being around 80% full.
A good barometer in general is the total car count on AutoTrader. Pre COVID I think it was around 480-500k, it got as low as 300k early summer this year and has crept back up to 426k as of today.
However that’s not the whole story as even once supply returns, demand is much higher. I think this is the reason we’ll see a gradual drop off not a sharp one. Ultimately we’ve printed something like 25-30% more money than existed 2 years ago and it’s got to go somewhere.
However that’s not the whole story as even once supply returns, demand is much higher. I think this is the reason we’ll see a gradual drop off not a sharp one. Ultimately we’ve printed something like 25-30% more money than existed 2 years ago and it’s got to go somewhere.
Deleted User 298457
Deleted User 298457
Because they've finally stopped derping out and realised WBAC/Cazoo are paying way more than them and taking all the stock.
Saw the converse at the weekend - went past Hylton Gott kings lynn volvo - stacked with used cars , unless they are stockpiling for other dealers,
they are all in , if the market crashes (omicron, further energy supply issues courtesy of Ukraine or oil increase, just inflation ) they'll be holding the baby.
they are all in , if the market crashes (omicron, further energy supply issues courtesy of Ukraine or oil increase, just inflation ) they'll be holding the baby.