Car finance plans come under attack
Finance schemes credited with reviving the retail car market have been slammed as misleading by leading industry figures.
Personal Contract Purchase (PCP) plans were introduced four years ago to support flagging retail sales during the recession. An estimated 100,000 cars were purchased using the plans last month.
Manufacturers have spent multi-million pound marketing budgets on promoting schemes like Vauxhall’s Choices 1-2-3 and Ford’s Options. But several motor finance sources now believe the schemes mislead and will be phased out to make way for leasing schemes.
In PCP schemes, consumers put a deposit down on a new car, pay a variable fee for the two or three years of the contract, and then buy the car at the end of the contract if they want it by paying the remainder. But critics say consumers have been misled and are often left with less money to put towards another new car than they had expected at the end of the contract.
“Many PCPs have been sold with what could charitably be described as ‘enthusiastic naivety’,” says Derek Pridmore, marketing director of HSBC’s Swan National motor finance. “The industry is going to take some serious flak when the realities of many PCP contracts become clear.”
It is a view echoed by Denis Keenan, head of the newly established contract hire division of the Vardy dealer group, Vardy Contract Motoring. “PCPs have been a slightly unethical aberration designed to hide the true costs of motoring. The complexity and small print of PCPs are blackening the name of vehicle finance.
“Manufacturers want people to think they can run a new car for 100 per month – but everyone in the trade knows you can’t,” says Keenan.
News Analysis, page 18
