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PCPs up as buyers go for security

Bank of Scotland Dealer Finance believes a survey identifying rising retail buyer enthusiasm for personal contract plans (PCPs) underlines an opportunity for dealers to increase F&I business in a tough economic climate.

Peter Cottle, head of strategic accounts, said dealers could assist both themselves and buyers attracted by PCPs’ guarantee of a three-year value on a car.

“Now cars are so much more reliable, PCPs can be used to sell used as well as new ones,” he said. “PCPs should go to the top of dealers’ lists of ways to boost F&I revenue.

“People want to run a car on a tighter budget these days and are looking for a lower rate than hire purchase.

By operating their own PCPs, dealers can do better financially than selling cars off manufacturers’ schemes.”

BOSDF provides guaranteed three-year values in PCPs written for dealers who like to operate outside the programmes provided by car manufacturers.

Many dealers say they welcome the power of carmakers’ PCP schemes to drive customers into showrooms.

But because they are often subsidised by manufactures, there is little margin for retailers.

The potential of PCPs for dealers has been underlined by car supermarket Motorpoint, which reports a 16% increase in the turn-over of its branded PCP scheme Boomerang.

Boomerang operates like manufacturers’ PCPs, but guarantees monthly payments and final values (subject to conditions) on nearly new and used cars.

Motorpoint, which operates its finance arm in association with Black Horse, expects growth in fixed-cost motoring as people face the credit crunch, uncertain interest rates, house prices and inflation.

A Motorpoint spokesman said: “Customers are often shocked by how much their car has depreciated in two or three years, and haven’t budgeted for it.

“They are then forced to either keep their car longer than they intended, downgrade to a lower specification, or part with more cash.”

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