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CAP: PCP no threat to future used car market

Fears that the explosion in new cars financed on PCP will lead to oversupply in tomorrow's used market are unfounded, according to CAP.
Forecasting experts for CAP Gold Book, the independent future residual values benchmarking tool, say the expected increase in PCP part-exchange vehicles will not adversely impact market stability for the foreseeable future.
Although CAP has long been reassuring customers privately that PCP growth is not an impending issue for those exposed to future residual values, concerns continue to be voiced elsewhere around the question of an approaching imbalance of supply and demand in the used market.
Now, Gold Book senior editor, Dylan Setterfield, has moved to quell fears with a three-point argument against what he describes as ‘scare stories' about future ex-PCP used car supply.
Setterfield said: "We do expect there to be more PCP part exchange vehicles coming to market going forward, but we do not expect there to be enough volumes to adversely affect the market in the short term.
"For vehicle sectors where new car supply is a significant factor in used car price changes, increases in registrations have already been incorporated into our forecasts. However, it is also important to emphasise that the increase in PCP is not synonymous with new car sales growth.
"A lot of the growth in PCP is cannibalised from other sales channels, whether that be other credit options or outright purchase.
"There is also a fear that these vehicles will ALL come back in 3 years' time and some observers have been peddling scare stories to this effect.
"The reality is that manufacturers are putting offers together on a wide range of durations and the vehicles will come back at different intervals.
"Most of them, if renewed with the same manufacturer, will come back at around 6-12 months before the scheduled contract end date and will form a staggered chain of used car supply.
"We will certainly see some increase in volumes coming back into the used market as a result of PCPs, but some of these would have been coming back into the used market anyway and we expect demand to be strong enough to cope with any additional increase in supply going forward."

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  • Ian Allen - 29/07/2014 13:15

    Rather than being generic the problem of residual value protection may well be brand specific. Certain manufacturers have sought to significantly ramp up their new car sales during the last 2/3 years and as such may have the greater problem when dealing with PCP and leasing returns.