AA says new financing deals are getting cleaner cars on to the roads but is there a catch?

Anything that improves the poor air quality in Britain's citites is to be welcomed. Consumers should be wary all the same

Tuesday 20 November 2018 12:50 GMT
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Car finance deals are getting more modern vehicles like these on to the roads
Car finance deals are getting more modern vehicles like these on to the roads

The car market is changing dramatically, as the AA has today made clear.

The organisation says the number of people planning to hang onto their vehicles for more than five years has dropped by 11 per cent. That accounts for 3.4m motorists.

The driver for this is the growth in popularity of financing deals that allow buyers to upgrade every three years or so.

The AA says a Populus poll it had conducted revealed that about a fifth of the cars currently on the road are being funded by financing plans such as Personal Contract Purchase (PCP) or Hire Purchase (HP), and the number is growing fast. By the AA’s reckoning, some 700,000 more cars have been purchased through these deals in the current cycle when compared with when motorists last bought a car.

Only minority plan to keep their vehicles at the plans' conclusion, with most preferring an upgrade and a new deal.

The old model that saw people hanging on to their cars for as long as possible with the aim of wringing the maximum value from their purchases is falling away.

In some ways this could be seen as a rather positive development. James Fairclough, the CEO of AA Cars, notes that vehicles are steadily getting cleaner and more efficient.

The cyclical effect of these deals means that buyers are getting less environmentally destructive vehicles on to the roads at a faster clip than might otherwise be the case. That is to be welcomed, particularly in Britain’s traffic clogged cities where air quality is notably poor.

But there is a downside, or at least there could be, when the question of how good these deals really are for consumers is raised.

Which? makes the point that car finance is a major source of profit for the motor trade, which further adds to its bottom line by selling extras such as insurance products.

Financial products are renowned for carrying a sting in the tail and both Which and the AA urge consumers to ‘do their homework’ before jumping in and to take advice if there is something that rings alarm bells.

The Payment Protection Insurance debacle is in its its end game - the Financial Conduct Authority’s cut off for new claims comes into force next year.

Given the financial services industry’s record, however, it’s fair to ask where the next scandal is coming from and whether car finance could be a contender.

The AA notes ‘increasing confidence’ among consumers in what's on offer. That could easily change.

One consequence of the shift in the market is that a glut of used vehicles is being made available. They can often be purchased quite cheaply, and financed quite cheaply with the help of, say, a bank loan.

These can be very competitive, particularly when compared to financing deals. Savvy consumers take note.

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