For many, buying a car is the second-largest purchase they will make in their lives, after their home. The number of first-time homebuyers in the UK rose to a 12-year high in August 2019, thanks in part to government initiatives such as Help to Buy. Meanwhile, the rate of car ownership by UK households has held more or less steady at around 78 per cent, largely due to the growing availability of different financing options.
Since the recession, the popularity of personal contract purchase (PCP) has boomed, allowing buyers to spread the cost of their car and keep the option to trade it in, while helping retailers and manufacturers increase customer retention. However, in recent years, the rise of personal contract hire (PCH) and, later, subscription services such as Zipcar have threatened to undermine the very idea of car ownership. But what do the emerging trends in motor financing tell us about the future of the sector? And what does the rise of 'mobility-as-a-service' offerings mean for the auto retailers?
PCP began in the 1990s with Ford Options, allowing customers access to a new car for a monthly fee based on their expected mileage, deposit amount and the length of their agreement. However, it didn’t emerge as the most popular way to buy until after the financial crisis, when it allowed customers access to vehicles they may have struggled to buy outright, while retaining an option to change that was lacking from more traditional hire-purchase (HP) agreements.