The widening gulf between the stable cost of new cars and dropping second-hand values means that employees who have taken cash and bought their own cars are increasingly out of pocket, warned Paul Allen, of Bank of Scotland Vehicle Management, which runs the Freeway PCP scheme.
He called the situation a 'bear market' and added that PCPs can remove some of the risk for employees and retain some of the benefits of a company car scheme.
Allen said: 'PCPs bring many benefits to the corporate driver. In many ways, a PCP replicates the traditional company car, which many drivers electing to take cash are already used to, in that it provides fit-and-forget motoring.
'The driver contracts the car for a certain term, which can be anywhere between 12 and 48 months, at a specified annual mileage.
'Regular service and maintenance, including tyre replacement, can also be included for a small additional fee. All the driver has to worry about is insurance.
'Unlike hire purchase, where payments cover the total cost of the car plus interest, with a PCP the driver only pays the amount the car depreciates during the agreement period.
'This means the driver is not financing the residual value of the car, which reduces the actual cost of ownership substantially.'