PCP is set to be the new PPI scandal based on various mis-selling and sharp practices.



Personal Contract Plans (PCPs) are a very popular and easy way to drive around in a new car (or a motorbike) for a deposit. Relatively small monthly rental payments are linked to the depreciation of the asset that you will never own.

At the end of the term (usually 3 years), you have the option to buy the vehicle based on a ‘Guaranteed Minimum Value’ or roll part of that over as a deposit to get another new vehicle. The Guaranteed Minimum Value at the end of the PCP plan to purchase the vehicle is based on the projected value when you enter into the agreement, although this can often be more than the vehicle is eventually worth.

It means that consumers can get new cars and motorbikes for a fraction of the price they would pay if they were to buy one outright.


There are catches and this is a bubble that is set to burst sooner or later. The sheer volume of cars that will eventually flood the second hand car market will result in the collapse of used car vehicle prices. If and when that happens, drivers could lose their entire deposit to secure another vehicle and claims management firms believe this has not always been made clear.

They also believe that few car owners taking out a PCP were warned that they could pay a higher interest rate than a standard Hire Purchase (HP) agreement.


Concerns are growing over the quality of the car finance market, with record levels of debt being utilised to fund new cars. Car finance loans are now being packaged up and sold to giant investment funds and pension providers on the securities market, which mirrors similarities to what triggered the global crash in America with home loans.

Claims management firms who have made millions from the PPI mis-selling scandal are looking at the way car loans have been sold, and people have reported cold calls from companies hoping to cash in on PCP claims.

As with PPI, sales commissions are often used to sell these contracts. It’s fair to say that there will be an element of mis-selling in this, given the sheer volume of these products being sold.


It’s only a matter of time before the claims lawyers get their teeth in to this, which will result in repercussions far and wide within the car finance industry.

Whilst a PCP in itself can be an ideal solution for many car owners as it reduces the monthly payments quite significantly, the crux of this lies with the way these products have been sold. Diesel cars form a big part of this.

I correctly predicted ‘rent to own’ firms becoming regulated in the same way as pay day companies, and my money is on this scandal blowing up sooner or later.

This will be an interesting one to watch.

What are your thoughts on PCPs?

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