After a night where I spent more time awake than asleep, a few thoughts on an article that caught my attention as my nose and I existed in a state of decidedly unequal equilibrium will have to suffice this morning, picked from overnight news.
This headline comes from the FT. The story itself is behind a paywall, but the message is clear:
I am quite sure this is true of any organisation supplying credit. In fact, it has long been believed that car manufacturers make little or nothing from making cars, but do profit from supplying credit to sell them.
There are good reasons why I see the advertising and credit-creation businesses as the real problems to tackle if we are ever to make progress against climate change. The goal of selling credit is what motivates the desire to market what are often unnecessary, overspecified, designed to be obsolete products that are destroying our planet, whose sole purpose is to provide the purchaser with momentary gratification that they might just have got ahead in the game of life by increasing the visibility of inequality, when finding purpose in any other way has been denied to them either as a matter of fact, or becasue they have been told this is the only way to achieve that aim, and they believe it.
This is not a way to run an economy.
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[…] of credit cards, as I have already done this morning, the FT has reported […]
In respect of motor vehicles specifically, most new cars are bought using Personal Contract Purchase schemes, whereby the user essentially just pays for the credit & depreciation of the vehicle during the term of ownership.
Without PCP new car sales would be much lower.
PCP is aptly named, after the illegal drug Phencyclidine.
You pay a deposit, then you pay monthly for a few years, then you need to find a large sum of money to actually buy the car, or give it back and have nothing (unless 2nd hand prices are overvalued, and you kept the car so pristine that it is still showroom quality, then you might get a little bit back).
You then of course have no car, so you start the process again – another deposit, another few years of monthly payments, and then another large sum of money to complete the purchase, or return the car for nothing.
Doesn’t that sound like an addiction?
I am bemused as Tom why people do this.
It seems so extraordinarily expensive.
Yes, having a car by this method is very expensive. But so is owning a car by any other method. Buy a cheap 2nd-hand car, and you may well find it costs more in repairs than the buying price. A lot of people need a car, because public transport is inadequate or not even available. And there’s only so much one can do with walking and biking, even if fit to do so. At least a car on PCP is not going to break down and leave you in the lurch, and this may be worth paying for.
I have owned them same car, bought second hand fir £10,000, for tens years. Of course there has been servicing and tyres to pay fur and 8 drive under 10,000 miles a years now, by some way. Total repair rather than servicing and tyres costs have no yet reached £1,000. Second hand cars can be very good value if looked after.
Second-hand cars “can be” good value, but it’s not certain. My own Skoda was bought 16 years ago, and has needed very little in the way of serious repair. My son’s work van, bought less than 2 years ago, cost him more than the purchase price in repairs. I don’t know of any data about the life and reliability of second-hand cars; without that, we just have anecdotes.
Accepted. My point is, if you have a good one, keep it.
There is far too much private debt in the system at the moment – it looks like a volcano waiting to blow to be honest.
Correct.
All this guff about the “National Debt” obscures the real debt crisis…… both personal and corporate. Debt has its uses but what it always does is reduce resilience….. and that is dangerous at an individual and system level.
We are all in agreement
Richard wrote, ‘there are good reasons why I see the advertising and credit-creation businesses as the real problems to tackle if we are ever to make progress against climate change. The goal of selling credit is what motivates the desire to market what are often unnecessary, overspecified, designed -to-be-obsolete products that are destroying our planet.’
Some advertising informs the public about what is available – but most misrepresents reality by exaggerating advantages while largely ignoring drawbacks. There is a fundamental dishonesty about it. If the issue was simply style or boasting, it might not matter so much but the scientific consensus is that ‘billions of lives are at risk!’
Too often, it seems, pundits express opinions based on … a judgement of hoped-for political advantage … religious allegiance … community respect … desire for journalistic pre-eminence … or academic aspiration of some kind. Then, tragically such opinions may influence public policy – but they are not grounded in science.
Galileo observed that the earth moved round the sun. Threatened with removal of his eyes he recanted. But then when he had been blinded, he was heard to say, ‘but it does move.’ Einstein gave way when evidence emerged that contradicted one of his theories.
Rutgar Bregman’s remarkable Reith Lectures are generally inspiring. Sadly, at the end of Lecture 3, he played down the importance – the compelling urgency of the science. Science is about evidence. In the scale of large scale human survival, science must have supremacy over opinion.
I have just listend to his third lecture.
Profoundly disappointing overstates my reaction.
Neoliberalism is apparently dead, which is a farce.
Proposing all the wrong answers on tax – becauise Piketty et al do not understand tax, at all.
And generally proposing what feels like very elitist solutions – which the audience rumbled, again.
“car manufacturers make little or nothing from making cars, but do profit from supplying credit to sell them”
Having been in the motor trade for a good proportion of my life and working for franchised dealers for at least 10 years, I suspect that may be true now, but it wasn’t in my day. You are right that car manufacturers do not make anything on selling cars, but when I was in the game it was the dealers who made their profit from the finance. In the mid-eighties an Austin-Morris dealer would typically lose £500 on a sale but make at least 3 times that on the finance. Most of my commission was earned from F&I, and I was regularly being taken out for lunch by Forward Trust because I was their most succssessful salesman. What’s more, the manufacturers used to make huge profits from the sale of parts. I once went on a parts course at VW in Milton Keynes and we worked out how much it would cost to build a Polo from parts. It was 10 times the price of a new Polo if I remember rightly. The whole automotive industry is a thoroughly murky business. I was very relieved to get out of it.
Hope you get over the lurgy soon, Richard.
Steve Keen has recently made a video on this