Fleet News

RV decline hits value of PCPs

THE sharp decline in residual values this year means thousands of personal contract purchase schemes will end in negative equity. Glass's Guide has predicted that cars bought two and three years ago on PCPs will now be worth less than their guaranteed minimum future value (GMFV).

This means the dealer buying the car back will be out of pocket, while drivers will have no equity to put towards a new car, even if they can walk away from the deal with nothing further to pay. Manufacturers typically set the GMFV at 10% below the projected market value of a car, so that the customer could use the surplus as a deposit for their next vehicle.

Alan Cole, Glass's chief car editor, said: 'The idea of the PCP was that at the end of the contract the customer should remain loyal to the marque and buy another new car from the same dealer. In discussions with leading dealers recently it is clear that some GMFVs have been set too high and so the customer has either no equity or negative equity.'

Glass's has estimated that some dealers have achieved up to 90% of their retail sales with PCPs, and they now face the prospect of paying more for a car than it will fetch in the used market and losing a customer.

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