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Only a third (35%) of drivers plan to keep their
current car for more than five years – marking a sizeable
decline in long-term ownership compared with their previous
car[1]
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A fifth (18%) of private cars currently on the road are
now bought using car finance deals – up by 700,000 since the
last car buying cycle
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The most popular car finance deals often allow buyers
to ‘upgrade’ their car after the three year term ends, tempting
drivers back to forecourts more frequently
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Drivers who bought their current car using finance are
considerably less likely (27%) to keep it for more than five
years
The increasing popularity of car finance deals is contributing to
the decline of long-term car ownership, according to research
from AA Cars, the AA’s used
car website.
The number of drivers who plan to hang onto their current car for
more than five years has dropped considerably - by 11% - since
owning their last car. This means there are around 3.4 million
fewer drivers who have long term intentions for their current
vehicle[1].
The AA-Populus poll of 20,666 drivers found that a fifth (18%) of
cars on the road are currently funded using various forms of car
finance, such as Personal Contract Purchase (PCP) or Hire
Purchase (HP) plans – which equates to around 700,000 more cars
funded using these deals since drivers last bought a
car[2].
Those who used one of these routes to buy their current car are
much less likely to hold onto their car in the long term - only a
quarter (27%) of drivers using one of these finance options plan
to keep their car for more than five years. Four in 10 (39%)
intend to hold onto their car for less than three years.
These deals typically give drivers the ability
to upgrade or buy their vehicle once the initial term ends. Only
two in 10 (20%) consumers using PCP plans actually buy the car at
the end of the deal, suggesting that the option to ‘upgrade’ to a
new car is propelling the sharp fall in long-term
ownership[3].
James Fairclough, CEO of AA
Cars comments: “Even a few years
ago, the majority of drivers would have expected to hang onto
their car for as long as possible in an attempt to wring as much
value out of it before heading back to the forecourt.
“The growing confidence in car finance products has helped to
change this dynamic. The three-year cycle of PCP and HP deals
mean that drivers are returning to dealerships much sooner than
they would have.
“This is good news in a number of respects; as technology
advances, cars are becoming cleaner and more efficient. The
cyclical effect of these deals means that buyers are introducing
these more environmentally-friendly motors to the roads, rather
than persevering with older and less environmentally friendly
cars.
“The domino effect for the used car market is that a glut of
nearly-new stock continues to flood forecourts and is available
to buyers who are looking to prioritise value over a brand new
registration.
“For buyers with an eye on car finance plans, it pays to do
homework before committing to something, as some deals will
invariably suit you better than others. Providers are
increasingly hosting a soft credit check service which won’t
leave footprints on your credit record. That means you can glance
at what you qualify for, see what your total commitment is over
the course of the term and then make a call on what suits you
best.
“Before you sign up to any finance deal, remember to read all the
small print so you know what you are signing up to, and seek a
second opinion if there’s something you don’t understand or that
doesn’t look right. It’s also a good idea to have a second-hand
car inspected before purchase to ensure it is mechanically
sound.”
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Notes to editor
Populus interviewed 20,666 AA members on the AA-Populus
online panel between 16th-22nd October.
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There are 30,900,000 drivers on the road and 11% of
30,900,000 is 3,399,000: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/608374/vehicle-licensing-statistics-2016.pdf
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There are 30,900,000 drivers on the road and 2.2%
of 30,900,000 is 679,800 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/608374/vehicle-licensing-statistics-2016.pdf
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Source: https://www.moneysavingexpert.com/car-finance/personal-contract-purchase/
