12:07 pm, February 23, 2015
PROBLEMS for used car retailers competing with very affordable new car deals will be overturned by a new breed of dealer finance product – the used car PCP.
That’s the message from CAP Automotive, the leading independent car information experts.
Massive growth in new car registrations over recent years has been largely fuelled by low-cost Personal Contract Purchase schemes, enabling more private motorists than ever before to afford a new car.
But this has come at a cost for many dealers, who report difficulty in selling younger used cars without painful discounting that eats into profit margins. This is because the brand new car is often more affordable – through a PCP deal – than a nearly new car purchase with traditional finance.
It has meant a constant worry for franchise dealers who pre-register cars to meet manufacturer targets, because they constantly find themselves carrying late, low-mileage stock that is harder to sell than a new car.
For independent used car dealers, the growth in new car registrations has sucked motorists’ attention away from nearly new cars, making it increasingly difficult to compete with their franchised counterparts.
But the introduction of used-car PCPs, with low- or zero-deposit schemes and more affordable monthly rates, helps to level the playing field.
Robert Hester, of CAP Automotive, said: ‘The market has been crying out for innovative solutions to the problem of an imbalance between the new and late used car retail markets and it looks like the used PCP is the answer.
‘Used car dealers are excited about it because they are suddenly able to compete more effectively after struggling for so long to match the low deposits and monthly payments offered in the new car market.
‘It’s also great news for franchise dealers who previously faced the problem of shifting nearly new cars they had registered to qualify for target bonuses and often resorted to something close to distress-selling just to keep stock moving.’
Current used-car PCP deals are offered on cars up to three years old, for a further three years. They are made possible by CAP’s forecast used car values, which provide a trusted picture of the car’s market value all the way through to the end of the PCP period.
This means the finance provider is secure in the knowledge that it will not lose money on the deal when the car passes back to it for future sale as a standard, older used car.
Rob can be heard discussing the benefits of the used car PCP on the CAP Automotive podcast channel.
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