2030 car ban effect on PCP

The expected price hike of electric cars could mean the end of the road for vehicle ownership, with a drastic effect on auto financing.

The ban on selling new diesel and petrol cars is to come into force in 2030 and, with no more internal combustion engine vehicles – whether petrol or diesel, or even short-range hybrids – being produced, new car sales are tipped to plummet.

It’s expected that the ban will make it impossible for many motorists to buy brand-new internal combustion engine-powered cars by 2030. And that will lead to a demand for quality vehicles on the used car market.

The anticipated rise in the cost of electric cars could price out a substantial number of potential customers. An AA study showed that four in five people believed electric cars to be too expensive.
And the expected huge drop in customers buying new will have a severe knock-on effect for dealers offering Personal Contract Purchase (PCP) arrangements.

Future prospects

If you are looking to buy on a PCP finance plan, or follow a regular buying-and-replacing cycle of three to four years, nothing in the legislation will affect you doing that with petrol or diesel cars today.

When the time comes to replace the car it will still present a viable sales prospect.

And anyway, the reality is that nearly a decade of electric vehicle infrastructure and development remains before the ban comes in. That means that, while electric cars will be far more advanced than those we see on our roads today, we can safely predict that petrol and diesel-powered cars will be far from obsolete nine years into the future.

They can still legally be used on our roads – we just won’t be able to buy any new ones.

Cars appear to be holding their value better, due to the forthcoming demand for quality used cars – something to bear in mind if you are looking at a finance deal. The increase in value will be of no use to you though as, at the end of your PCP term, you would only be trading in against the Guaranteed Minimum Future Value you signed up to at the outset. The only one benefiting from the boost in value would be the dealer who is selling the car on.

So, are the days of personal car ownership numbered?

New trends

At its peak, the PCP market accounted for around 88% of private car sales in the UK in 2016. But the alternatives to traditional car ownership are simply following on from market trends, especially among younger people.

As an example, consider the impact Netflix and Amazon Prime have had on our TV viewing habits, or the effect of streaming services such as Spotify on the music industry. There is no need to go out and buy a DVD or compact disc.

Smartphone-based car-sharing apps, car clubs and subscription schemes may well do the same for motorists.

More young drivers, especially in urbanised areas, will most likely pay for short-term access to cars, subscribing as and when they need them, or using car-share apps. The notion that car ownership is something of a status symbol and is to be aspired to is fast becoming consigned to history.

Combining that change in car-buying attitudes with the expected price tags of electric vehicles means ownership could be out of many peoples’ budgets, or simply not considered a priority.

So, some uncertainty exists over the auto-finance industry going forward.

Attractive options

PCP has, for years, been the most attractive option for car buyers and, in many cases, it will have been the best move, given the low repayment rates, how easy they are to arrange and the flexibility involved.

The downside has always been that with a PCP deal the driver effectively leases the car and doesn’t own it until they make a balloon payment at the end of the agreed term.

And more than half of those using PCP to buy their vehicles recently admitted in a CarGurus survey that they didn’t know what PCP stood for. Only a tenth of those surveyed knew what was in their contracts’ small print.

Given the perceived ‘mystery’ surrounding PCP deals, with a host of details that dealers and lenders would prefer you didn’t read buried away, you may feel you have been mis-sold your finance plan.

This could be the case if:

You borrowed more money than was necessary.
You weren’t given enough information about other options, such as hire purchase.
You felt pressured into accepting a PCP agreement.
The commission on your sale wasn’t revealed to you.
You were sold a mileage estimation that was too low.
They didn’t make it clear who owned the car.
You weren’t told who is financially responsible for any repairs.
It wasn’t explained that you wouldn’t automatically own the car outright until you had made the end-of-term balloon payment.

If any of the above circumstances apply to you, you feel you may have a case to make a claim for compensation.

Barings Law have a team of experts ready to help you to make a successful claim, on a no-win, no-fee basis.

Call us on 0161 200 9960 or click on the webchat button in the bottom right for a free, no-obligation chat.