Central Bank reveals there are fewer PCP’s than previously thought

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Central Bank reveals there are fewer PCP’s than previously thought

The Central Bank has revealed that there are fewer PCP deals in the State than previously thought and has revised down the number of outstanding live contracts by 50,000.

The Central Bank has updated their findings with regard to Personal Contract Plans and found that the PCP car finance market is considerably smaller than previously thought.


Even though there has been a revising down of the figures, the Central Bank has reiterated its concerns about the sector and still feels there could be issues with the market.


Back in March, the Central Bank regulator warned of “increased indebtedness” of consumers who take out PCP finance. The Central Bank also recognise the banking system’s exposure to the car market, as PCP’s are becoming the go-to source for finance in Ireland.


Originally, the Central Bank found there were 126,249 active PCP contracts but The CB on Thursday revised that figure down by almost 50,000 contracts to 76,582.


Why the sudden change? Well the revision came due to car companies over-reporting the number of outstanding PCP deals. The regulator said the reason for the revision was smaller car companies included expired deals in the reported numbers instead of just recording live contracts.


In the first six months of this year there was €347 million of new lending in PCPs, down 15 per cent than the same period in 2017. The total PCP market is now worth about €1.4 billion.


PCPs were first introduced after the economic crash in 2009 as sales of new cars fell by almost 63 per cent. PCP finance deals usually involve an up-front deposit of between 10 and 30 per cent; then low monthly repayments spread over 36 months with a balloon payment at the end.


This payment is the original agreed future market value of the vehicle which the lender estimated and established at the beginning of the contract. In March, the Central Bank raised a number of issues for consideration, including the “increased indebtedness” of consumers. They also made an analysis of the market and showed that many people take out loans to finance the final instalment, pushing up the overall cost of credit.


The Central Bank is also concerned about the “extent of affordability and credit checks” on Personal Contract Plans and the incentives banks which the banks are offering to their customers to retain new business. It warned of the banking system’s “exposure to the car finance market” should a shock to the second-hand car market occur.


Another concern raised by the Central Bank regulator was the rise in the value of the euro against sterling after Brexit.They maintain that there has been a 95 per cent jump in the number of cars imported into Ireland from the UK.


Car buyers here are continuing to take advantage of the weakness in sterling by going across the water to find a car. The Central Statistics Office said the number of imported vehicles licensed in the State for the first eight months of the year rose by 10.4 per cent to 67,060 . In contrast, the number of new cars licensed here fell by 4.5 per cent to 111,461.


Justin Kavanagh
Justin Kavanagh is a recognised leader in automotive intelligence and vehicle data supply to the entire motor industry. He has almost 20 years experience in building systems from the ground up. As the Managing Director of Vehicle Management System, he understands the need and importance of trustworthy and reliable vehicle history and advice to both the trade and the public.
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