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3.6 While consumers were aware of the initial deposit paid, and whether that was in cash or as part of a trade-in, they did not think of it in terms of a percentage of the overall car value at the time. Most of the consumers who participated in the focus groups said that they could accurately recall their APR and they could compare it to the rates offered for comparable finance products, although it was not possible to test the accuracy of these statements. The consumers asked by the CCPC said that they knew what amount they were paying per month and most based their decision to engage with PCP on the basis of what they could afford each month
3.10 Another common condition of a PCP is servicing requirements. The dealership can specify where the car hasto be serviced, how often it should be serviced and in some instances what the service should include. Although the research indicated that the possible expense of not being able to arrange the service elsewhere could be a source of annoyance for consumers, it also highlighted that consumers were made aware of this condition by the dealers prior to entering the contract.
3.11 Penalties for excessive wear and tear are a specific condition of PCP agreements. Discussions with consumers indicated that they were not confident as to the definition of excessive wear and tear and what this could mean at the end of the term. This suggests that this issue may not be adequately explained to consumers at the point of sale including, for example, what the dealership’s definition of excessive wear and tear is, how it affects the vehicle’s value, and the penalties or charges that may be incurred by the consumer.
Misconceptions regarding the equity – Although the GMFV is set to allow for fluctuations in the second-hand car market, the CCPC’s research indicated that consumers could not imagine a situation where there would not be enough equity in the car to roll their PCP. Rather, there is a perception that the providers of PCP finance have ‘engineered’ the GMFV so that there will always be some equity left in the car in order to encourage consumers to roll into another PCP contract. As discussed in Chapter 2, a sudden decrease in second-hand car values could affect the amount of equity in the car at the end of a PCP contract.
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