Mike Bailey, CAVA Finance 0161 222 9599
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Over the last few years the popularity of PCP (Personal Contract Plans) has increased in the UK. A PCP plan gives you the ability to acquire a new vehicle for an agreed length of time, with the option to trade in the vehicle at the end of the agreement or pay off the guaranteed future minimum value and keep the vehicle.

Of course, like every industry, the motor finance industry has been hit hard by the impact of the pandemic but there has been a significant spike of interest around personal vehicles and motorhomes recently.

CAVA can help with Personal Vehicle Finance

Whilst CAVA Finance primarily focuses on commercial, minibus and taxi finance, Mike has a wealth of knowledge and experience across both business and personal vehicle finance.

During the months in which car dealerships were closed, applications dropped by 82% but have since increased. From July to August this year new and used car finance applications rose by 24% in comparison to the previous year, according to Experian.

It is looking to be a strong September for the industry, with new 70 plates being released earlier in the month.

PCP is one of the most popular ways to finance a vehicle, new or used, because of lower monthly payments. One thing to note if you are considering PCP, is that lenders will be assessing people’s financial situations even more carefully than usual, due to the potential impact of coronavirus on finances, to ensure the deals offered are manageable and affordable in the long term.

The PCP Calculation

The amount you’ll pay each month on a PCP agreement is determined by firstly your deposit amount and secondly, the estimated value of the vehicle after the length of your agreement payment term.

You won’t own the vehicle unless you pay a final ‘guaranteed minimum future value’ sum, which is based on the predicted residual value of the vehicle at the end of your PCP agreement.

If you’re looking at a used vehicle, be aware that age is not just a number! The age of the vehicle could impact the cost of your monthly repayments or could mean you’re not able to find a suitable PCP agreement because the age of the vehicle makes it difficult for lenders to predict its residual value.

New or Used – what’s best?

Currently the figures reported by the FLA are much stronger for used vehicles than new, there are a number of factors why, from the impact on finances to the dip in production and closure of dealerships but ultimately it’s your decision.

If you’re considering a new or used vehicle for personal use and you require any impartial, no obligation advice, or if you’re considering your finance options but don’t know where to start, please get in touch. You can call Mike on 0161 222 9599 or use our contact form and he’ll be happy to discuss your needs.

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News

It’s being described as a ‘mis-selling bonanza’ by the tabloids, as UK regulators unearth the extent of mis-sold car loans. With around 9 in 10 new cars purchased through PCP deals, it’s now come to light that car salespeople have been overcharging customers in a bid to earn more commission.

PCP Loans are personal contract purchases, they suit those who like to or need to change their car regularly but still want to stick to reasonable monthly payments, within budget. Unlike a usual loan, once a PCP deal is completed, you won’t pay off the full value of the vehicle and you won’t automatically own the vehicle at the end of the contract.

Some UK dealerships are now under fire following a two-year investigation by the Financial Conduct Authority. The probe began in April 2017 following a surge in household debt and complaints about PCPs hit record levels.

The FCA have discovered that the extent of the overcharges is an average of £1000 per customer, resulting in a collective £300Million a year in excess interest payments.

As claims management companies investigate the way the PCP loans have been sold, it appears many have been misled regarding; interest rates, how much their vehicle would be worth at the end of the deal or if there would be penalty fees if you looked to switch your vehicle early. Dealers have not done enough to make customers aware of potential higher interest rates on a PCP deal, as opposed to a standard hire purchase agreement.

The car finance market has been under heavy criticism recently over the growing number of loans being taken out and as a result, new record levels of debt. The issue being highlighted here is over sales people at these dealerships taking high levels of commission.

The FCA found that the monthly PCP payments were often linked to the level of interest charges, “giving salesmen an incentive to ratchet up the cost of a finance deal.”

Their findings also uncovered;

– Many dealerships fail to properly explain how the PCP contract works

– Failure to perform affordability checks to ensure customers can afford the repayments of their loan

– A majority fail to inform customers that there is commission involved when they set up a loan, although this isn’t currently a legal requirement

“We found some motor dealers are overcharging unsuspecting customers over £1,000 in interest in order to obtain bigger commission pay-outs for themselves…. We estimate this could be costing consumers £300million annually. This is unacceptable.” The FCA’s Director of Supervision, Jonathan Davidson commented on the situation.

It’s important to note that the FCA have indicated that it will start to consider a ban of certain types of commission but that it’s not planning on enforcing punishment on lenders over existing loans.  

Whilst many may view going directly to a dealership as the more traditional route to purchasing a new vehicle, it’s not, as the FCA has highlighted, always the most financially stable option. Dealerships offer a deal to you from a limited resource of finance houses, whereas an independent broker, such as CAVA Finance has access to a whole market to be able to secure a suitable loan for you.

If you’re considering your next purchase, think about the benefits of CAVA’s experience and that we’re not fuelled by a need to gain high levels of commission!

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Executive, Hints & Tips, News, Prestige

The UK has seen a sharp increase in those seeking loans or finance for new vehicles. Personal Contract Purchase plans (PCP) allow drivers to acquire a new vehicle on an agreed length of time. Once the plan period is over, you can either trade in the vehicle or pay off the remaining loan on the vehicle and keep it.

 

The Financial Times reported that “British households borrowed a record £31.6bn in 2016 to purchase cars, up 12 per cent on the year before, according to the Finance and Leasing Association.”

 

The popularity of vehicle finance was further highlighted by 85% of new vehicle purchases throughout 2016, being made through a dealership or finance provider.

 

PCP is the most popular finance option, it’s simple to understand and can be flexible depending on your needs, relating to monthly repayments for example.

 

PCP is for personal finance only. At CAVA we have helped several business owners with the purchase of their personal vehicles. Husband and wife, Brian and Heather Boys are a perfect example of one of CAVA’s long standing PCP customers.

 

“My wife and I have been using CAVA Finance for over 12 years on all of our cars, which we both replace every 3 years. CAVA understand our needs as a customer due to the experience and knowledge Mike Bailey displays each time, which you don’t get from your local car showroom.

 

Every time I am asked to recommend a PCP/Leasing company to use, I have no hesitation in saying CAVA.”

 

CAVA have an attractive PCP Product available and are often more competitive than motor dealers. Contact us before you sign at a dealer to see what your options are, you’ll be glad you did!

 

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