Nine things to know about Personal Contract Plans (PCP)

The Competition and Consumer Protection Commission (CCPC) recently released their report into the use of Personal Contract Purchase (PCP) finance writes Geraldine Herbert

1) On average consumers spent almost 4½ times longer selecting the car in comparison to considering how to pay for it.An average of 9.7 hours is spent by most car buyers researching cars at home and 7.2 hours physically viewing cars. By contrast an average of only 3.8 hours is spent researching finance options.

2) PCP finance has grown significantly in Ireland in recent years, with the number of new PCPs issued increasing from 21,000 in 2015 to just under 33,000 in 2016.

3) The average PCP contract was worth just under €25,000 in 2016 which implies an average car value of approximately €31,000, assuming an average 20% deposit.

4) There are a considerable number of restrictions which apply to PCP contracts. Although many consumers are generally aware of what these restrictions were, they did not necessarily understand the implications of them. For example, what would be construed as excessive wear and tear.

5) The majority of consumers who enter into PCPs either intend to, or actually roll their agreements, calling into question the extent to which consumers pay the GMFV and become legal owners of the car.

6) Current arrears and default rates on PCP are low. The level of PCP contracts that fell into arrears from 2015-2017 (as of 1st August 2017) was low; 1.4% and the default rate over the same period was 0.3%.

7) If a consumer defaults on the payments, the finance provider may have the legal right to repossess the car.

8) When compared to other consumer financial products, PCP is particularly complex. This complexity arises not just because of its structure – a deposit, monthly repayments and the GMFV – but because of the numerous calculations and choices that exist for a consumer as they come to the end their PCP.

9) Most consumers chose to roll their PCP and use whatever equity they have in the car as part of the deposit for their next car. But that equity can be affected by the mileage, the condition of the car and future second-hand car values. While consumers can control some of these factors, they cannot control all of them.



Geraldine Herbert

15th March, 2018

Author: Geraldine Herbert

Contributing Editor and Motoring Columnist for the Sunday Independent and editor of wheelsforwomen. Geraldine is also a regular contributor to Good Housekeeping (UK) and to RTÉ Radio One, Newstalk, TodayFM and BBC Radio. You can follow Geraldine on Twitter at @GerHerbert1

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