Accent MR Accent

Are PCPs running into trouble?

In March, the FCA published its report on Motor Finance. It uncovered concerns about the way in which lenders are choosing to reward car retailers and other credit brokers and, ultimately, the impact this has on consumers.

With PCP (Personal Contract Purchase) accounting for more than 80% of new car finance, the focus quickly shifted onto this most popular of finance agreements. The FCA found that some customers may have been overcharged on PCP agreements, due to the use of commission models in the industry.

This has led to an avalanche of negativity around a product that our research consistently shows to be very popular with consumers who love the flexibility it offers – flexibility in the deposit required, flexibility in the contract term and flexibility in the end of contract options. Over the years, we have equally seen little evidence that it is too complex for consumers to understand. We have also seen very little evidence that it is common practice among dealerships not to explain clearly the product and assess affordability.

Clearly, if the use of specific commission models leads to a possibility of mis-selling, this would be valuably addressed. The best way to ensure that the product is explained clearly, affordability is assessed thoroughly and consumers are presented with all finance options open to them is to speak to those consumers on a regular basis. And when research shows that the vast majority of consumers is very clear about the product and very happy with it, it doesn’t mean that the work is done. What works for consumers now may not in a year’s time. Consumers and the way they purchase products, including cars, constantly change – and the way dealers sell and explain products needs to change with it.

To find out more about our experience in the automotive finance sector contact