PCP revealed as most confusing finance type

Car finance products are amongst the most confusing automotive terms for car buyers and it could be hampering sales, according to new research from Leasing.com, the car leasing comparison website.

Internet search data identified using the Ahrefs analytics tool for Leasing.com found that both Personal Contract Purchase (PCP) and Personal Contract Hire (PCH) agreements appear to be misunderstood.

PCP is the most popular new car finance type and yet it accounted for more than half (52%) of all internet searches querying its meaning (some 13,180 searches over a one-month period). PCH received 2,060 internet searches over the same period - 8% of the total queries.

Paul Harrison, chief partnerships officer at Leasing.com, said that while many in the automotive industry take common finance acronyms for granted, the industry may need to go further to demystify and explain them: “The confusion around PCP and PCH highlights a need for automotive businesses to further educate and inform buyers, particularly new car consumers who are especially interested in those finance products.

"This is particularly important ahead of the introduction of the FCA’s Consumer Duty, which sets higher and clearer standards for regulated businesses on consumer protection. This doesn’t just mean clearer information and processes in showrooms but across all digital channels to help increase understanding as soon as consumers start their car research.”

Beyond finance, dealers could also help explain the explosion of acronyms that have followed the shift towards electric and hybrid vehicles.

Plug-in Hybrid Electric Vehicle (PHEV) was the second most queried automotive term, with its definition searched 2,870 times over a month and accounting for 11% of total queries.

This suggests less knowledge and understanding of plugins compared to battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs), which both saw far fewer internet queries.

Harrison added: "Internal Combustion Engine (ICE) was the third most-queried acronym, with 2,400 monthly searches and 9.5% of total monthly searches. “The transition to electric vehicles and the 2030 ban on new petrol and diesel-engined cars has heralded an entirely new language for consumer car buyers.

“This has also impacted how we all discuss traditional engines which are now commonly referred to as ‘ICE’ but our research shows the term may be news to many motorists when they start their research for their next car.”

Other commonly-queried or misunderstood terms included Hire Purchase, Initial Rental, Balloon Payment and Guaranteed Minimum Future Value.