Half of PCP buyers plan to keep their car longer

Half of consumers (52%) who bought a car using PCP are expected to refinance them, rather than trade in for a new car at the end of the contract, according to research by NTT Data UK&I.

PCP is still the most popular way to buy a new car, but a combination of increased list prices and soaring interest rates means that PCP costs are on the rise. A recent report found that some new car PCP deals have risen by more than 40% on some models since 2019.

Combined with the cost-of-living crisis and the continued resilience of the second-hand car market, consumers are finding they are best off holding onto their existing cars rather than handing them back or replacing them.

Dominic Rowles, automotive client partner at NTT DATA UK&I, said: “The hope for the industry was that supply chain challenges would ease, and we would see car sales picking up again. However, the fact is that supply chain issues still blight the industry and when you combine that with all the news on the cost-of-living crisis, we get a perfect storm for car sales.

“PCP costs are soaring and our research found consumers are looking to hold on to their vehicle for longer rather than stretch themselves on a more expensive PCP deal, or step into the second-hand market for an inferior vehicle.”

New car registrations in 2022 are likely to be the lowest since 1982, according to the SMMT, but dealerships remain the preferred route for buying a new or used car. NTT DATA UK&I found that 82% of consumers still plan to buy their next car at a dealership versus 6% online, and 12% from a private seller.

Rowles added: “This challenges some of the OEMs’ thinking, as many believed that they were moving faster to a direct relationship with their customers. The importance of dealers in the new, digitally-transformed automotive landscape will need to be factored into the big digital programmes that we are currently witnessing.”

Consumer demand for motor finance remains strong despite surging interest rates, with engagement up 46% on pre-pandemic levels according to Auto Trader.

Despite the current backdrop of economic uncertainty, more than 1.9 million finance calculator interactions were recorded on Auto Trader last month.