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Retailers should tread carefully with PCP deals in September, warns Auto Trader and Financial OmbudsmanBack


  • Over seven in ten new cars will be financed through personal contract purchase (PCP) deals in September market, forecasts Auto Trader
  • 450,000 new cars will leave showrooms in September ‘plate change month’, making it the 42nd month of growth in the new car market
  • Retailers are being warned to take care with finance sales: the ombudsman highlights a rise in complaints about HP and PCP deals

Auto Trader, the UK’s largest digital marketplace for buying and selling new and used vehicles, has forecast the new car market for September. Continuing on 41 months of growth, experts predict a market of 450,000 units with more than 7 in 10 new cars financed on PCP deals.

Attractive PCP deals are seen as the engine of new car market growth, complemented by buoyant consumer confidence. Figures from the Finance & Leasing Association underline just how the market has grown in recent years, with used car sales beginning to follow the new car trend with progressively higher PCP penetration.

Proportion of private car sales funded through PCPs. Source: Finance & Leasing Association

2012 2013 2014
New car sales 64% 70% 73%
Used car sales 26% 33%

However, retailers are being advised to tread carefully when selling PCP products in September, following figures from the Financial Ombudsman Service which show an 18% rise in Hire Purchase complaints (including PCP deals) in 2014.

In total, 1,784 complaints were handled by the service, with the majority of these related to the purchase of a vehicle. Of these, 37% of these were found in the consumer’s favour.

“It’s worth remembering that people are often more focused on the thrill of buying a new car and can lose sight of the small print,” warned Caroline Wells, head of outreach at the ombudsman. “When making a sale we’d urge all dealers to make sure their customers know what they are signing up to and to keep records of what was discussed. That means that if problems crop up later down the line, they can be sorted out easily.”

“Retailers are looking forward to a bumper September market and it’s important that we help them make the most of the opportunities, but also to navigate a path away from potential problems,” added Paul Harrison, head of motor finance at Auto Trader. “While the increase in finance complaints is perhaps unsurprising given the overall increase in car finance sales, it is encouraging to see that the ombudsman often rules in favour of the industry. We’ve worked with the ombudsman to create a check list of new and used car finance dos and don’ts to help retailers avoid consumer complaints and manage them if they do arise.

Often issues stem from a simple lack of clarity or communication at the point of sale. Tips from Auto Trader and the ombudsman include the following.

  • If a consumer is buying under a finance agreement, take the time to thoroughly explain how the product works. A salesman may think that the number of monthly payments, the interest rate or the fact that a ‘balloon payment’ may be required at the end of the agreement are obvious. But taking the extra time to draw this to the consumer’s attention could avoid any disagreements further down the line.
  • Sometimes, consumers who have bought a car on finance may run into difficulty making the repayments. This would be something that they need to speak to the finance company about directly but, should a customer approach you, be helpful. If you’re able to find the right person or number at the finance company then some simple signposting can help the person reach a resolution much more quickly.
  • A used car may have some wear and tear when it’s sold. But if a consumer contacts you to complain, taking the time to clearly explain the difference between fair wear and tear and mechanical defects improves transparency between the two parties. Often complaints happen because consumers and dealers are not clear with each other. Investigating any problems thoroughly and with the right evidence will go a long way to resolve it –simply relying on the fact that the car was “sold as seen” is unlikely to carry much weight, particularly if/when a complaint is reviewed by the ombudsman.
  • If you have a vehicle provenance certificate or anything else to show the history and quality of the car, don’t wait for the customer to ask for it, offer it up to them. Customers may not always know about these, so offering this level of service could help reassure them. Some retailers are opening displaying provenance information alongside vehicles being advertised on their website which can only help build trust.

Posted by Sue Robinson on 04/09/2015