Experts warn that cheap financing will not last. Our consumer champion explains what went wrong – and how to avoid being attracted
Since the beginning of 2009, so-called “toxic” car loans have attracted attention in the UK. The reason many people ca n’t drive is a method of financing called personal contract purchases (PCP). Starting from buying cars in the United States in the 1990s, the entire financial transaction now accounts for almost 90% of new car payments.
At the beginning of the transaction, a guaranteed future value (GFV) will be provided to the car. This is subtracted from the front yard price. Then, the buyer pays the down payment and pays the car price minus the GFV fee every month, but pays interest on the entire price.
At the end of the semester, he could choose to buy the predetermined GFV car or return it to the dealer, but he got nothing. If the trade value of the car at the end of the period is greater than GFV, he can also choose to use the equity of the car as a deposit for another PCP of the new car.
So what's the problem?
To make monthly payments more tempting, the manufacturer ’s financing agency has become useless in all these areas and has placed unrealistically high GFVs on its cars. Then, manufacturers, financial institutions and dealers owe cars far more money than possible.
The price paid by buyers of PCP far exceeds the price of chewing, which complicates the situation. If they repay more than 50% of the financing amount (that is, the total cost of the car minus the deposit paid), they can legally conduct the transaction. But they need to study PCP affairs in depth to avoid this threat.
Buying a car through a PCP financing transaction
involves the cost of leaving the PCP transaction.
What is happening now is who is doing his best to provide car funds to the attending doctor, and the purchaser loses his income due to the high proportion of coronavirus, unable to keep up with the payment, and then returns to drive or get it back. Chasing the debts of these buyers through the court is slow and time-consuming.
However, for manufacturers, even worse, financial institutions and dealers have returned a large number of cars, but the market is small. People don't buy anything at all.
The Financial Leasing Association (FLA) said tolerance measures may include suspension of payments, reduction of payments or waiver of interest: "The lenders work hard, but due to the coronavirus, the number of employees has decreased and it will take longer."
What are car manufacturers doing?
Volkswagen and Ford said they have taken emergency measures to help customers. Volkswagen brands include Audi, Seat and Skoda, who said they are taking "special steps" to help customers in the PCP program keep their vehicles safe.
They will be provided with payment services for up to 60 days, in which case they will not be required to pay or charge extra fees. The manufacturer ’s financial institution will also consider extending the buyer ’s time to repay the debt.
South Korea's Ssangyong automobile production line has
almost ceased global automobile production, although some Chinese factories have resumed production of complete vehicles, and the
most important part of the global automobile industry is this part. On the other hand, most car manufacturers have now stopped producing new cars. Many potential new car buyers will only postpone the purchase.
Others may use PCP's low yield to snap up better deals. Therefore, the market will be in a state of chaos for a period of time.
What if the pandemic is over?
After the corona virus crisis, manufacturers, financial institutions and distributors will have to make up for the losses. Therefore, there is only one way to increase car prices. stand up
And, of course, the government needs to increase taxes to pay taxes to keep the auto industry running, which will reduce disposable income and prevent the public from buying expensive goods such as cars.
Can I pay?
If you "lock" the car and park it on the street, you must have a valid MoT highway driving license, even if you don't use it, you must also insure and tax the car. If you need to repay the tax during the six-month MoT "holiday", you still need to apply for MoT to get the recorded tax exemption, otherwise the online system will not function properly.
If your car is not on private land, unless you have issued a legal off-road notice (SORN) that prohibits cars from driving on public roads, you must still “continuously ensure”.
However, unless the vehicle is shut down for a few months, canceling the insurance may not be worth it, because administrative expenses may eliminate all the benefits.