From PCP to PCH

  07 July 2014

We’re all familiar with the huge rise in new car sales, financed by on PCP schemes, and a lot of people are looking at the impact of this trend on the used car market. It’s something Auto Retail Bulletin has covered extensively, including this particularly insightful article by Glass’s valuations and analysis director, Richard Parkin.

However, it seems there may be another implication of the swing to PCPs and that’s the fact that it gets car buyers more into the habit of making monthly payments than other finance products do.

I suspect it’s not just PCP schemes but also other monthly payments, such as those for mobile phones, which are getting consumers used to the idea.

And here’s the thing: with consumers more used to a simple monthly payment, according to a top 20 manufacturer and a major finance provider I spoke to in the past week, there is the beginnings of a swing to personal contract hire. It seems people are realising that they probably won’t bother with the final payment on a PCP and so they’ll just switch vehicles. With that thinking in place, a simple contract hire agreement is one a further step way.

If this trend does grow, retailers will have to think more carefully about customer retention – something PCPs lend themselves to, where as contract hire does not. However, if consumers are looking for simplicity then those looking for a single monthly payment are probably also looking to pay for servicing as a package, too.

Tristan Young


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