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PCP financing to revolutionise used car market, industry expert predicts


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Personal contract plans (PCPs) could transform the used car market in the same way that financing deals have boosted new car sales to record levels, an industry expert has predicted.

Dealer shaking hands with a coupleTrevor Finn, chief executive of car dealer Pendragon, says the way people buy used cars is being turned upside down by so-called PCP deals.

Instead of a motorist having to pay in full for a used car, a PCP requires them to pay a small deposit followed by a fixed sum each month, which makes the vehicle seem more affordable. When the term ends, the finance provider guarantees the vehicle's value, which effectively means the driver is only paying for depreciation.

When the contract ends, the driver can choose to hand back the keys or use equity built up in the current vehicle to buy another one, the Telegraph reports.

Finn commented:Three-quarters of new cars bought on finance are with PCPs and that's spreading to used cars, especially as younger buyers have got used to the small monthly payment concept from the way they buy mobile phones.

Though there is no official industry data on used car financing, Pendragon says that used car PCP purchases have increased from almost nothing five years ago to 28% now among mass-market brands.

In the second hand luxury car market, where a car's value is easier to calculate as it ages, PCPs are far more established; the level of sales has doubled to 55% since 2011.

James Baggott, managing director of Car Dealer magazine, agrees that PCPs are likely to become increasingly popular.

"They used to work only on premium cars because they held their value better but now finance companies are getting more adventurous," he said.

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