A special finance scheme growing in popularity is helping to boost new car sales, which have risen to their highest level in six years.
The scheme is the personal contract purchase (PCP) plan which has led to a substantial rise not only in sales but in sales involving some sort of finance scheme.
The number of new cars registered in 2013 rose 10.8% compared with 2012. More marked still is the rise in the number of vehicles bought under a finance deal, with such schemes now representing 74% of all sales compared with only 46% in 2006.
PCP is a variation of a hire purchase agreement but the key difference is that the value of the car at the end of the contract is calculated at the start of the agreement and this value is deferred. This method is thought to be ideal for people who want lower monthly repayments and change cars on a regular basis.
“PCP is getting more and more popular and is different to a personal loan,” said Finance and Leasing Association communications head Andrea Kinnear. “With this type of agreement the risk is different and you can get some very, very good deals. There may be an initial fee but that’s agreed in front of you. At the end of the agreed period you can either buy the car outright or hand it back and enter another PCP scheme with another new car.”