Some manufacturers are reporting average vehicle returns of 24 months; triggered by rise in finance deals
Doug Revolta Autocar
23 August 2016

New car buyers are changing their cars more regularly than ever before due to the popularity of PCP finance deals, according to new data from automotive valuation firm Cap Hpi.

Some car manufacturers are reporting average returns of vehicles of 24 months along with a growing number of 18-month leases, while finance deals are predicted to be used more regularly on the used car market.

The new car market has seen a strong period of growth in recent years. Around 80% of new car sales are sold through finance deals, triggering a move in mentality from ‘ownership’ to ‘usership', according to Cap Hpi.

Philip Nothard, retail and consumer specialist at Cap Hpi, said that a few years ago having a car for five years or longer was not uncommon and that younger buyers are driving the shifting trend.

“Young buyers are the new consumers coming through,” Nothard said.

“The mentality is: the car does a job, it costs a certain amount each month, and if they can afford it they get it. There’s a lot more of that to come.”

Currently the average month on a 24-month PCP agreement is 20-22 months, while on a 36-month arrangement it's 27-29 months.

Nothard doesn’t believe the trend of changing cars will get much shorter and expects it to stay around the 20 to 24-month period, with 12 months being too short for many drivers.

The increasingly regular change in ownership is most prominent on the new car market and has saturated the used car market, but finance deals on used cars are also likely to see a sharp increase.

“Manufacturers are not showing any signs of easing off," Nothard said. "Finance deals are at the centre of many marketing campaigns.”

"It provides a good source of cars for used dealers because they know exactly where the car has come from. We’re going to start to see growth in the used car market in PCP deals."

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Comments
13

23 August 2016
They are like mobile phones. You always want to upgrade to the latest model.

23 August 2016
It'll all end in tears

 

Hydrogen cars just went POP

23 August 2016
xxxx wrote:

It'll all end in tears

For who, exactly?

Not the consumer, if PCPs continue to be the route to market. The buyer has three clear options laid out on day one and doesn't really carry any risk.

1. Pay the lump sum agreed on day one, keep the car.
2. Hope for a bit of positive equity which can be used to get you into the next car a bit cheaper (or with an upgrade).
3. If there is no equity, walk away!

Rates seem to be inherently conversative, in order to maximise the number of people picking option 2. It seems to be working as well, given that (as per the article) people are often able to change early.

23 August 2016
It's obvious that people aren't getting any smarter

23 August 2016
Brexit was blamed yesterday for Vauxhall seeing Corsa and Insignia sales fall yet today, despite what all the Brexit scaremongerers told you, I read the industry is buoyant with new car buyers changing their cars more often?

So are we now saying Brexit has been good for the industry? Or are we saying it's been bad? Or are we now in agreement that Brexit was never going to make any difference?

23 August 2016
scotty5 wrote:

Brexit was blamed yesterday for Vauxhall seeing Corsa and Insignia sales fall yet today, despite what all the Brexit scaremongerers told you, I read the industry is buoyant with new car buyers changing their cars more often?

So are we now saying Brexit has been good for the industry? Or are we saying it's been bad? Or are we now in agreement that Brexit was never going to make any difference?

Daft comment. This article is clearly based on mid-long term trends and any Brexit impact on this trend could not possibly be measured yet.

23 August 2016
Brexit may eventually lead to increased costs for consumers. Immigrants are supporting second hand car prices. If your car is worth less at the end of three years then your monthly payments will go up to pay for the depreciation.

23 August 2016
Brexit may eventually lead to increased costs for consumers. Immigrants are supporting second hand car prices. If your car is worth less at the end of three years then your monthly payments will go up to pay for the depreciation.

23 August 2016
Maybe need to change that from the Millennials to Rentals. For manufacturers this is a step in the direction of no car ownership. If you put Uber Autonomous cars into the mix, we will all be on pay as you go before you know it.

23 August 2016
Not surprised things are shifting to finance deals, especially considering the amount you lose just signing on the dotted line and its worry free driving. Whereas buying a car outright you have to worry about maintaining the car and the residuals of the car (mine has lost 20k in 2.5 years).

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