Personal contract purchase continues to dominate showroom point of sale finance as manufacturers battle for sales in the recession, with deals falling by only 6% in the first four months of the year.

The Finance and Leasing Association says PCP’s performance compares with other forms of finance that were down between 25% and 33% over the same period.

Dealers like the way carmaker-financed, low-APR PCPs draw buyers into showrooms, but many believe their own profit margin should be better.

Another attraction for manufacturers is that many buyers hand cars back at the end of PCP agreements, allowing them to be recycled as used units through the franchised network.

The FLA’s latest data shows that dealer motor finance is still the most popular way to buy a car, with over half (53.1%) of motorists using it. 

But the volume of motor finance is still down on previous years and the FLA remains sceptical about the value of the scrappage scheme to assist the recovery of finance companies.

“It is too early to judge whether it will have an impact,” said an FLA spokesman. 

“It may be that before buying a new car consumers have been waiting for the scrappage scheme which took effect from May 18.”

He said FLA statistics showed there was still an urgent need for government support to combat the widening gap between the supply of finance and consumer demand. 

The continuing impact of the credit crunch is having an effect elsewhere. Manheim Auctions says there has been a rapid increase in vehicles being returned under the voluntary surrender rules of the Consumer Credit Act 2006. 

“Returned vehicles need to be very carefully managed to control costs,” said a spokesman. “Finance companies are being urged to introduce robust inspection regimes.”

“Typically, total charges on a voluntary termination between £300 and £600.  Voluntary terminations apply in cases where vehicles have more than 50% paid on the total finance contract .