Are prices due to crash?

[Hawthorn37]

Boxing Day offers do we think?

 

[Mansfieldman750]

We ordered our van in Feb 2021 and took delivery October2021. The interest on PCP from VW finance was 2.8%.
Now its 8.9%. That’s 6.1% difference.
6.1% of say £60,000 to finance after a big deposit is £3660 more interest per year.
In other words the same van would cost around £300 more per month on PCP.
So I think on affordability alone there will be less demand for new Cali’s
How will that affect used Cali prices ?
Well maybe lack of demand for new ones might help to prop up used prices but on balance I think prices will go the same way as houses, used cars and motorbikes in the coming year or two, ie down.

 

[calibeach76]

It was a bubble, a very big bubble and we all know what happens to bubbles....

 

[JimP1992]

It was a bubble, a very big bubble and we all know what happens to bubbles....

Didn’t you sell your Cali…?

 

[calibeach76]

Yep for 10% more than I bought it for in April this year having used it and enjoyed it for a season and put nearly 10k on it. I got out at the top!

 

[sidepod]

We ordered our van in Feb 2021 and took delivery October2021. The interest on PCP from VW finance was 2.8%.
Now its 8.9%. That’s 6.1% difference.
6.1% of say £60,000 to finance after a big deposit is £3660 more interest per year.
In other words the same van would cost around £300 more per month on PCP.
So I think on affordability alone there will be less demand for new Cali’s
How will that affect used Cali prices ?
Well maybe lack of demand for new ones might help to prop up used prices but on balance I think prices will go the same way as houses, used cars and motorbikes in the coming year or two, ie down.

Is that how a PCP works? I thought you only financed a portion of the total price hence the final balloon payment?
If that’s the case then surely you won’t be paying interest on the full price?

 

[Mansfieldman750]

Is that how a PCP works? I thought you only financed a portion of the total price hence the final balloon payment?
If that’s the case then surely you won’t be paying interest on the full price?

Unfortunately it doesn’t work like that. The interest is calculated on the full amount you borrow, and why wouldn’t it - it’s someone else’s money.
Say for example you put a £10000 deposit on a new California costing £70000. The balloon payment is £40000 after say 3 years. You pay interest on £60000, not £30000.
The monthly payment consists of two components, the interest (on the full amount borrowed ) plus an amount required to reduce the total amount owed to £40000 after 3 years.

 

[Mansfieldman750]

Sorry should have said £20000 not £30000 , forgot about the deposit.

 

[andyinluton]

Unfortunately it doesn’t work like that. The interest is calculated on the full amount you borrow, and why wouldn’t it - it’s someone else’s money.
Say for example you put a £10000 deposit on a new California costing £70000. The balloon payment is £40000 after say 3 years. You pay interest on £60000, not £30000.
The monthly payment consists of two components, the interest (on the full amount borrowed ) plus an amount required to reduce the total amount owed to £40000 after 3 years.

This why VW could have trouble selling vans soon
On the above example interest at 2.8% would have been about £2,100 over the 3 years, reducing the amount owed was £20k =total £22,100.00 divided by 36 = monthly of £613.00

With rates at 9.8% its £7,359.00 of interest so payments are up to £759.72

VW then decide the residual has dropped on anything bought now by £10k - ok it reduces the balloon but it needs paying now rather than at the end.
The payments are now up at £1,037.50 a month

Anyone that has already got a van on PCP either has to find the money at the end, refinance it or sell, the refinance costs have rocketed so may not be an option for some. Replacing with a new van, similarly the rates have rocketed, only option left is to sell.

 

[Mansfieldman750]

Anyone that has already got a van on PCP either has to find the money at the end, refinance it or sell, the refinance costs have rocketed so may not be an option for some. Replacing with a new van, similarly the rates have rocketed, only option left is to sell.

And if that happens the law of supply and demand will apply and used prices will come down.

 

[sidepod]

And if that happens the law of supply and demand will apply and used prices will come down.

Oooh steady on there, you don’t want to upset the “flat earthers” on here who refuse to accept that their units will do anything other than appreciate!

 

[Hawthorn37]

Anyone that has already got a van on PCP either has to find the money at the end, refinance it or sell, the refinance costs have rocketed so may not be an option for some. Replacing with a new van, similarly the rates have rocketed, only option left is to sell.

Hi @andyinluton, I agree with your summary, I hope you don’t mind my clarifying and adding a further angle on this. If people have a PCP now (I.e. prior to Interest rates increase), the interest charged and the amount paid per month on your PCP will not change, for the duration of the term. The balloon payment will also not change. The only negative to this is that, at the end of the term if the van is not worth, say the agreed balloon payment of £40k, having a market value of say £35k, you either pay the £40k and suck it up the £5k “loss” and continue to enjoy using your van. Alternatively, you hand the keys back (but if there’s any damage outside accepted very minor dings and scratches) then this is charged to you.

We‘ve had one experience of just handing back the keys on a PCP, on a BMW X3 around 3 years ago. BMW had set an unrealistically high balloon payment in order to reduce the monthly payments. The tactic is common amongst car companies, to reel in customers on the headline low monthly figures. As it happened, we were quite happy to chuck the BMW back as it wasn’t a “keeper” (drive was not great).

At the moment the market more of a lottery compared to the last 10/15 years in my opinion. Not only the peaks and troughs of the 2nd hand market, but also the coming of 2030 and the demise of the Diesel engine from consumer cars. So who knows? Our feeling is, we didn’t go into Cali ownership as an investment, but as a change in our way of life, and I can’t see us moving away from Cali ownership in the next 10 years - with just maybe a change up to a Grand Cali or similar in about 5 years when the joints are starting to seize up !!?

 

[babble]

i just had a look at the prices in Belgium for second hand Calis and they do seem to have come down a bit, but that may be due to the time of year too. I think come February/March demand tends to go up significantly. For now the list prices for my van are still about 5k higher than i paid for mine three years ago, which i guess means the real price would be about the same as i paid.

 

[Elmo3]

We ordered our van in Feb 2021 and took delivery October2021. The interest on PCP from VW finance was 2.8%.
Now its 8.9%. That’s 6.1% difference.
6.1% of say £60,000 to finance after a big deposit is £3660 more interest per year.
In other words the same van would cost around £300 more per month on PCP.
So I think on affordability alone there will be less demand for new Cali’s
How will that affect used Cali prices ?
Well maybe lack of demand for new ones might help to prop up used prices but on balance I think prices will go the same way as houses, used cars and motorbikes in the coming year or two, ie down.

Not quite, unless the interest is a flat rate (unlikely at the rates quoted). it will be an APR, which takes into account the reducing balance through time as monthly payments are made. Rough and tough on a fully amortised loan, the APR is double the flat rate. Of course, the balloon is racking up interest every day it sits there. The increase in funding cost is already having an impact on car prices. Although many Calis are bought for cash, there are enough which are not so this will impact the market IMHO. After all, cheap money drove it up, more expensive money will drive it down, as with houses.

 

[Kayleigh]

Given PCP costs are as high as mentioned earlier, one would expect that to have a significant negative effect on high value purchases like Californias. Couple that with high inflation and energy/fuel costs, demand for Californias will likely slow considerably. That’s what happens in a recession - luxury items get hit.
With a shortening in supply of new vehicles, there will be less used Californias available. In theory this should sustain higher used prices. However, we are now in the off-season for Californias, when prices always soften. Through my own basic research of the Beach model, it looks like prices of T6 models have fallen in recent months, maybe by up to 10%.
Looking ahead to 2023, given the current economic climate it is hard to see used prices rising again. However, with the lack of supply and overall cost of buying new, I would envisage prices at the end of 2022 to remain fairly consistent until the autumn. That’s my opinion and prediction for the next year!

 

[Corradobrit]

Oooh steady on there, you don’t want to upset the “flat earthers” on here who refuse to accept that their units will do anything other than appreciate!

We haven't seen the T7 Cali yet. If its a Ford based unit I predict prices for 'real' Cali's getting a boost.

 

[Borris]

A cali is a modern vehicle. Regardless of how well they have held their values in the past, there was never a guarantee. You either accepted that when you purchased or you effectively, "had a flutter". The fact that the market is changing should come as no surprise. Markets for any commodity rarely remain constant as they are subject to numerous, often unrelated pressures.

Unless you need to sell, your van still does the same thing.

Personally, I've never liked PCPs. IMO, that whole financing method has always been a disaster waiting to happen.

 

[Elmo3]

Personally, I've never liked PCPs. IMO, that whole financing method has always been a disaster waiting to happen.

It can work well in certain circumstances. The problem is that instead of it being a procurement option as an alternative to cash, it was the only way some (many in the case of cars) were ever going to drive said vehicle. Of course, that might work in an era of ultra cheap money and big discounts, not so clever when that agreement ends and they can’t run to another or even refinance. Many will be handing back expensive German metal on cheap leases and now in a Hyundai et al. God knows what the neighbours must think, the horror!

 

[Lambeth Cali]

I would have thought the price of diesel would have a larger effect on values of Californias than interest rates. Its beginning to hammer this choice of holiday.

While the 2030 or 2035 ban feels a long way off, the restrictions on going into cities are slowly increasing and feel like they are getting closer. With the temporary high price of fuel starting to look not so temporary I think vanning will begin to slow a little.

Prices don’t bother me at all however. I’ll keep using it until forced to stop. We’ve also pretty much decided to keep our 2008 Golf forever or until forced to scrap it.

 

[Mansfieldman750]

The only negative to this is that, at the end of the term if the van is not worth, say the agreed balloon payment of £40k, having a market value of say £35k, you either pay the £40k and suck it up the £5k “loss” and continue to enjoy using your van. Alternatively, you hand the keys back (but if there’s any damage outside accepted very minor dings and scratches) then this is charged to you.

That’s an interesting what if scenario. The sensible thing to do would seem to be to hand the keys back, let VW Finance take the £5k hit and buy another similar van for £35000.
But I like the one I’ve got and have nursed it through a mangled roof. Call it sentimental attachment. So I’m with you on that one. Mind you I don’t think the negative equity situation will arise.

 

[GrannyJen]

I think a lot depends on how much value you get out of considering residuals at all. Most of it after all is crystal ball stuff.

For me, and I suspect a lot of others, using a camper is a lifestyle choice. I cannot compare the "costs of holidays" because I do not in any case consider any alternatives to using my camper. I cannot compare camping costs to hotel costs because if I can live in my camper rather than a hotel room then I will.

The money has been tied up for a while, I no longer miss it and if I needed to sell the family jewels to survive the forthcoming recession then the camper will be the last jewel I will sell. The only time that residuals will be of concern is a) if I wished to trade in for similar or b I pop my clogs in which case it is not my concern but my estate beneficiaries

Some years some things are worth more, in other years they are worth less, such is the way of the world.

 

[2into1]

Is that how a PCP works? I thought you only financed a portion of the total price hence the final balloon payment?
If that’s the case then surely you won’t be paying interest on the full price?

I've heard many (sales type) people describe it like that, but it never seemed to make sense.

 

[Borris]

I would have thought the price of diesel would have a larger effect on values of Californias than interest rates. Its beginning to hammer this choice of holiday.

While the 2030 or 2035 ban feels a long way off, the restrictions on going into cities are slowly increasing and feel like they are getting closer. With the temporary high price of fuel starting to look not so temporary I think vanning will begin to slow a little.

Prices don’t bother me at all however. I’ll keep using it until forced to stop. We’ve also pretty much decided to keep our 2008 Golf forever or until forced to scrap it.

I'm not so sure that diesel prices will have a major effect on Cali prices. I suspect that most people who own a Cali aren't that hard up. Yes, if it's your only vehicle and you are doing high mileage each year, then maybe it could be a significant issue. However, many owners probably don't use their vans for all of their day to day use, so paying more for fuel probably isn't such a big deal.

Our van only gets infrequent use. We give it a regular maintenance run of course but save it for picnics, trips away, seven seat airport runs, and other load lugging trips. Paying circa £150 for a full tank is annoying but it wouldn't persuade me to sell or prevent me buying. Just been to the West Country and up to Central Wales to visit relatives and the fuel cost me around £200. However, the van won't be used much again for a while so it isn't really a big deal.

For day to day motoring we employ my late father's old 2005 1.4 Skoda Fabia Tdi diesel. It cost us nothing. Tax, insurance and MOT cost around £300 pa and parts are ridiculously cheap. It constantly returns 60+ mpg and it doesn't matter who uses it or where you leave it. If it gets bashed, it's not a big problem. I can thoroughly recommend such a car to save wear and tear, depreciation and excessive fuel costs from using a Cali full time.

As for cities, being a country bumpkin, going into those places fills me with horror. So I avoid them at all costs. Besides, driving into cities is just giving the authorities many more opportunities to milk that same old long suffering "cash cow". Even our local Canterbury City Council is taking ever closer aim at motorists in their Draft Local Plan to 2045. They are proposing all sorts of no doubt, lucrative forms of penalisation to hammer motorists still further. For a town centre that has be in decline for decades they seem to be doing everything to bang the last few nails into it's coffin.

I'm also not that bothered about residual values. That only matters when you sell and I have no plans to do that.

 

[Borris]

I think a lot depends on how much value you get out of considering residuals at all. Most of it after all is crystal ball stuff.

For me, and I suspect a lot of others, using a camper is a lifestyle choice. I cannot compare the "costs of holidays" because I do not in any case consider any alternatives to using my camper. I cannot compare camping costs to hotel costs because if I can live in my camper rather than a hotel room then I will.

The money has been tied up for a while, I no longer miss it and if I needed to sell the family jewels to survive the forthcoming recession then the camper will be the last jewel I will sell. The only time that residuals will be of concern is a) if I wished to trade in for similar or b I pop my clogs in which case it is not my concern but my estate beneficiaries

Some years some things are worth more, in other years they are worth less, such is the way of the world.

By comparison, what is the residual value of an alternative type of holiday? Apart from the all important memories they create, holidays are a total loss with 100% depreciation.

 

[larrylamb]

Looking ahead to 2023, given the current economic climate it is hard to see used prices rising again. However, with the lack of supply and overall cost of buying new

Personally i think there will be a glut of late T6 T6.1 coming on to the market as people offload their Calis. Far too many people jumped on the Cali bandwagon either due to covid or trying to profiteer and will get there fingers slightly singed if not burned. Prices will drop from their recent (inflated) highs. Just my opinion.