Car dealerships must brace for PCP influx

Car dealers need to prepare themselves for a large influx of personal contract purchase (PCP) stock, an industry expert has warned.

In a report by British Car Auctions entitled ‘The Closer View: A National and Regional Market Review’, automotive academic Professor Peter Cooke said that the suppliers of cars up to five years old are set to return to pre recession levels over the next two years. This is largely because many PCP contracts – which allow motorists to hire vehicles for a long period of time while the dealership maintains ownership of the car – are due to come to an end soon, meaning the vehicles will be returned to the motor traders.

Many vehicles during the recession were acquired on finance plans like this, meaning there could be a huge surge in the number of cars coming back into dealerships, Cooke said. In preparation for this, dealerships need to ensure their motor trade insurance policy is robust enough to cover any sizeable increase in the number of vehicles that are on the business premises; if the value of vehicles exceeds the limits of a trader’s insurance policy then the company could be left out of pocket in the case of substantial damage or theft.

Automotive expert Cooke stated: “With PCPs fuelling higher private new car registrations over the past two years, around 350,000 additional first-time used cars will eventually enter the used car market, with further volume coming from trade-ins and private-to-private used car transactions typically necessary to part fund the new vehicle.

“Supplies of 0-5 year old used cars will start to return to pre-recession levels over the next two years, addressing the shortfall of some 1.3 million cars of that age recorded on the country’s roads at the end of 2013.”