Bank set to unveil the first 'used car' PCP deal
131-reg vehicles are prime targets
THE spread of Personal Contract Purchase plans (PCPs) continues apace with the revelation that a bank will this week roll out a deal for cars aged up to 18 months.
I understand there is a small, but significant, number of 131-reg cars on the market with dealers that will be targeted by this new drive.
It could mean some reasonable deals for potential buyers.
Bank of Ireland Finance has confirmed it, and vehicle distributors to whom it provides motor finance, will unveil a PCP for 'newsed cars' from Friday.
It already has PCP deals for new vehicles and partners 14 motor franchises in the Irish market.
But up to now PCPs have applied in the main to new-car purchases so it is viewed as a significant development that a bank is extending it (via distributors) to 'used' cars - albeit with a specific age threshold.
PCPs have become massively popular. You pay a deposit (10pc to 30pc) and make monthly payments (usually for three years).
You agree the mileage you'll clock up. Based partially on that, the car will have a pre-agreed value at the end of the deal, (known as the minimum guaranteed value).
At the end of the three years you can buy the car outright for that guaranteed value, use the equity in it for another PCP deal or hand back the keys and walk away. The car is never yours unless you buy it at the end of the term.
The growth of PCP and low APR rates can be gauged by the fact they are financing as much as 71pc of new-car purchases.
And Pat Creed, managing director, Bank of Ireland Finance, says 90pc of applications are being approved for finance.
He added that, because motorists postponed buying in the recession, the cost of purchasing new now is much greater since the older trade-in is worth less.
Mr Creed says PCPs are attracting younger buyers in particular.
Research shows they prefer the lower monthly payment of such a deal rather than buying a car outright with an ordinary loan.
They are also used to the 'tariff' type concept where they pay for the use of an item and upgrade - as with their mobile phones.
"The introduction of a PCP product for secondhand cars should further drive growth in this market for the second half of the year," Mr Creed says.
Bank of Ireland Finance provides motor finance to the following distributors: Toyota, Ford, Lexus, Hyundai, Opel, Kia, Peugeot, Mercedes-Benz, Honda, Volvo, Land Rover, Jaguar, Suzuki and Mitsubishi.