conducted by Motor Finance this month shows 2010 saw
record levels of PCP penetration for nearly all car brands in the
UK market. Ian Dewsnap of Benchmark Consulting comments on the
survey’s findings, and wonders how far the increase will
It is very
interesting to note the continued increase in prominence of PCP
products in the UK market, despite a slight slowing of growth
between 2008 and 2009.
FLA data shows the proportion
of consumer financing conducted through PCP up from 55% in 2009 to
59.8% in 2010. An increase of 4.8%age points is remarkable, as is
the fact that PCP now represents nearly 60% of the
Within some brands, growth is
even more pronounced. Toyota is recording 84% of its consumer
contract mix on PCP. Three other leading brands are recording 74%
or greater and some have more than doubled their PCP mix since
Across all brands surveyed,
the emphasis on growth is definitely in the last two to three
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Why has it taken 20 years for
PCP to be so accepted, and is it being accepted for the right
reasons – eg, increasing dealer and brand loyalty? How does it fit
with today’s regulatory emphasis on advising and treating customers
The origins of PCP lie in the
US, where personal leasing became popular in the mid to late 1980s.
Ford and GM were early adopters, with Ford Credit bringing the
product to the UK in the early 1990s and adapting it to the
marketplace as a HP hybrid called Options. The expression ‘Personal
Contract Purchase’ was created to better explain it to the press
The idea was to bring a
portion of customers into this plan to create the opportunity for
them to change vehicle earlier than usual, thus keeping loyalty to
dealer and brand.
More cars, more often, more
A few dealers understood the
principles and managed to convince their customers – but as with
many initiatives, momentum is only gained when effort is
Nevertheless, for some the
effort was rewarded – I know of one couple who are on their ninth
PCP contract (and therefore ninth vehicle) from the same dealer
Now, with penetration rates
as they are, brands are starting to see the customer loyalty
benefits – Volkswagen reports more and more customers are remaining
with the brand at the end of PCP contracts.
But this is not the only
factor behind recent growth. As ever, there is no one easy answer.
It has been a combination of low rate incentives, action by dealer
groups, and customers seeking the protection the plan
I also can’t rule out the fact that many are driven by
payments lower than conventional HP – but I don’t think that is the
best reason for buying the PCP product. I want to look at that in
more depth next time.