New car finance payments go up as UK used car values take a dive



Monthly premiums on PCP finance deals are set to increase as finance providers face falling residual values

2017-06-26 17:45
Car buyersare facing longer and more expensive car finance deals in future as the sector battles falling used car values.
The Bank of England has warned that falling used car values are increasing the monthly payments as well as the contract lengths for drivers looking to take out a Personal Contract Purchase PCPagreement on a new car.
It said the sector is facing potential headwinds from a number of sources, including the slowdown in real pay growth and a fall in residual values for used cars.
Best new car deals 2017
Rupert Pontin, director of valuations at Glasss said that newer used cars are losing more of their value more quickly than before. On average, aused car that is less than two-and-a-half years old is currently worth 57.6 per cent of its original value, down from 61.1 per cent in 2014. Pontin added: This is likely to continue to be the case for the rest of 2017 and 2018.

Finance deals like PCPs are based on a Guaranteed Minimum Future Value GMFV which is an estimate made by the finance provider in the beginning of the deal on the cars residual value at the end of the finance agreement. If used car prices fall beyond expectations it means dealers take a loss on the cars because theyve overvalued them. Any future agreements would have to be amended to take into account the lower used car values, meaning buyers may end up paying more for their car.
Car finance market faces potentialmis-sellingscandal
The Bank of England said: Increases in the cost of new cars and decreases in the expected future residual values of many used cars had put some upward pressure on monthly finance payments on Personal Contract Purchase plans.
It added: Car companies had sought to offset this in a number of ways, including increasing the length of PCP contracts.
Are you worried about the solidity of the UKs PCP market? Tell us in the comments below...

Martin Saarinen

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New car finance payments go up as UK used car values take a dive
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New car finance payments go up as UK used car values take a dive
3 years ago

http://www.autoexpress.co.uk/car-news/consumer-news/99924/new-car-finance-payments-go-up-as-uk-used-car-values-take-a-dive

Monthly premiums on PCP finance deals are set to increase as finance providers face falling residual values

2017-06-26 17:45
Car buyersare facing longer and more expensive car finance deals in future as the sector battles falling used car values.
The Bank of England has warned that falling used car values are increasing the monthly payments as well as the contract lengths for drivers looking to take out a Personal Contract Purchase PCPagreement on a new car.
It said the sector is facing potential headwinds from a number of sources, including the slowdown in real pay growth and a fall in residual values for used cars.
Best new car deals 2017
Rupert Pontin, director of valuations at Glasss said that newer used cars are losing more of their value more quickly than before. On average, aused car that is less than two-and-a-half years old is currently worth 57.6 per cent of its original value, down from 61.1 per cent in 2014. Pontin added: This is likely to continue to be the case for the rest of 2017 and 2018.

Finance deals like PCPs are based on a Guaranteed Minimum Future Value GMFV which is an estimate made by the finance provider in the beginning of the deal on the cars residual value at the end of the finance agreement. If used car prices fall beyond expectations it means dealers take a loss on the cars because theyve overvalued them. Any future agreements would have to be amended to take into account the lower used car values, meaning buyers may end up paying more for their car.
Car finance market faces potentialmis-sellingscandal
The Bank of England said: Increases in the cost of new cars and decreases in the expected future residual values of many used cars had put some upward pressure on monthly finance payments on Personal Contract Purchase plans.
It added: Car companies had sought to offset this in a number of ways, including increasing the length of PCP contracts.
Are you worried about the solidity of the UKs PCP market? Tell us in the comments below...

Martin Saarinen

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