Over 90 per cent of buyers who financed their new car with a PCP (Personal Contract Plan) from VW Bank in 2012 are opting for another PCP when their contracts mature, according to Paul O'Sullivan, head of marketing for the VW brand in Ireland. "Customers have been very happy with the plan and no vehicles have been surrendered since we introduced it in 2012," he says.
PCPs typically run for three years and the first tranche of VW Bank Ireland’s contracts are now coming to an end. O’Sullivan says those who have not continued with a PCP have either opted for a traditional HP agreement (which allows a longer repayment time, usually five years) or have decided to buy a secondhand vehicle instead.
The uptake on PCPs by VW group customers as a whole (this also includes Audi, Skoda and Seat) is continuing to rise. In 2012 just over 30 per cent of cars financed by the bank were PCPs. This year the rate is over 70 per cent.
PCPs are attractive for car buyers because they include a minimum guaranteed future value underwritten by the lending institution. When the time comes to change cars, customers can use this value towards the deposit on their new vehicle.
O’Sullivan emphasises that while VW’s PCP data is just beginning to emerge, customers are getting more than the guaranteed future value on maturity. However he declines to indicate how much more as he says the amount varies with the size of the initial deposit and the monthly repayments.
VW is taking an aggressive approach to APR on its PCP finance packages to attract conquest buyers and encourage existing VW owners to trade up on spec. For example the APR on a PCP-financed Golf goes from 1.9 per cent on the high-spec Highline to 3.9 per cent on the mid-range Comfort Line to 5.9 per cent on the entry Trendline model. VW says its PCP saves customers buying a Golf Highline €3,147.80 compared with the cost of high street finance for the same model at an average APR of 9.5 per cent.
"We've put our money into increasing equipment packages and reducing APRs not into scrappage or discounts," says Lars Himmer, the new CEO at Volkswagen Group in Ireland. "This approach is better in the long term for both customers and our network as the value of a discount is lost when trading in whereas the extra specification makes a car a more attractive secondhand buy."
Volkswagen recently surveyed 1,000 motorists about motor finance. Over a quarter of those with a car loan had no idea what interest rate they were paying.
