It was proven in 2008 what will happen to the market, I see no reason why a very similar thing won’t happen again with the exception of the cost of holding dealer stock for 3 months when they can’t be sold. The main difference is that the GFV offered on most cars has been lower than 2008 as the bank learned not to risk negative equity when cars are handed back.
- Several owners using leverage finance will panic and/or be unable to maintain payments and will hand cars back at end of term of once 50% is paid as per the rules.
- There becomes a glut of cars available that were on finance, especially those on clever deals such as the stuff BMW offer for M cars. That oversupply drives a lower price, at least for a while.
- More people lease as they want a finite cost with no obligations.
- Higher end cars tend to go down a little too as buyers that can afford it wait and watch, instead of chopping and changing. They tend not to go down as much as cars say, below 40k or so but they do adjust.
- Banks either increase interest to compensate for less trade or the opposite and offer very low rates to encourage volume.
- Canny buyers that can afford pick up long term purchases at good prices. This eventually (2 or 3 years) drives the good examples off the market and that stimulates things as demand starts to outstrip supply.
- Governments offer incentives to get old cars off the road, flying in the face of their green targets and righteous exteriors. This is because manufacturing jobs are more important than global warming. In this case, we may see extending incentives instead on electric stuff to try and appear like they are doing the right thing, irrespective of the actual truth behind this technology today.
- Collector cars slow down in sales but as a commodity with finite supply, they tend to attract the wealthy and often will buck the trend as they are safe assets in some ways. However this is the really good stuff so cars that have creeped in to the market as collector cars but actually aren’t really can be hit. Things like a 993 porsche which really was made in too high numbers can be affected.
Some dealerships that utilise credit facilities to buy their stock could go under unless their bankers are understanding of the climate. Bigger dealers will have say, a £5m facility to buy and sell as they like. The more stock they have, the interest they are paying. Ordinarily they would flip stock through the auctions if it’s been on the forecourt for 3-6months but that’s not possible just now. So when we do get going, BCA will be flooded and that will cause a short term prices loss as well but it will sort itself out after the initial rush.
Smaller, smart dealerships, like Dicky will likely be a strong position as a wealth of choice comes onto the market allowing them to pick and choose the really good cars. There will always be a market for the good cars and keeping lower overheads will be a strong advantage.
In the end it does resolve.
All this is why I will keep the FF for some time, as long as I’m able to. There’s no point chopping it in a low market. Might as well enjoy it and wait out the initial uncertainty.
In all honesty, the current moment has made me realise how lucky we all are and that craving the next, faster, newer thing is actually ridiculous. So I accept my luck and and grateful.
