The growth of PCP and other finance options is driving the iphonifiaction of the motor industry, cap hpi has argued.

Andrew Mee, senior forecasting editor at cap hpi, said: “It is the start of a ‘pay to drive’ rather than ‘pay to own’ model, which is likely to fuel new ownership models in the future. People are comfortable paying a monthly fee to be mobile. This opens up the market to new opportunities.” 

Evidence cap hpi used to argue this point, included the fact that the length of time motorists own a car has plummeted, which it said is creating a world where consumers are likely to change their car more often than they change their phone.

The company noted this will have ‘huge implications’ across the supply chain, with a rise in frequency of ownership creating more demand to keep manufacturers busy.

The cheap finance that is driving the popularity of these ownership models is predicated by strong resale values. However the large numbers of nearly new cars returning to the market as a result of record vehicle sales and PCP penetration has concerned some that the automotive sector could be headed towards a housing style crash, with owners stuck in negative equity with their vehicles.

Mee said there were a number of factors making such a crash less likely. He argued: “Consumer demand remains strong in the used market, and this has supported values as volumes of used stock rise. It is also clear that PCP is becoming more popular in the used market and dealers expect its use to double in the future. This will further help to support demand.”

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In the UK, Mee said there was an additional cushion in the UK: “We don’t expect a bubble in the UK because our market operates differently to the US. The typical UK finance company works on 85 to 90% of our gold book forecast number, which is based on cap Clean condition. The US don't publish data in the same way.”

Cap hpi said some manufacturers see average returns of around 24 months, and there is evidence of a growing number of 18-month leases in the market. “Many organisations are contacting PCP customers well in advance of the end of the contract to take advantage of early equity parity and so secure a new deal. Manufacturers are managing volumes in the used market by varying contract lengths by model and remarketing channels,” cap hpi added.

Mee concluded: “2013 was the first big jump in PCP, from 145,000 vehicles to 424,000. We have lived with large volumes of vehicles through this finance model for some time now, with only positive effects on the market. Traditionally, there was always a shortage of good condition stock around the two-year-old age bracket and dealers are putting any returned vehicles straight back onto the forecourt, rather than disposing of them through auction, further supporting used values.”