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Q & A with James Comrie, Director of Wholesale Finance

James Comrie, Director of Wholesale Finance, shares his thoughts about the Personal Contract Hire (PCH) market, ranging from the growth of the market to the impact of the FCA’s report into the sector. 

What is Close Brothers Asset Finance’s role in PCH?

We’re a funder for PCH providers and not a PCH provider ourselves.  

Why do you think PCH has seen such impressive growth in recent years?

PCH has risen sharply because of two key contributing factors, the first being that PCPs (personal contract purchase) add a level of confusion for some of the public in terms of future ownership. The second major factor is that the younger generation is more focused on ‘usership’ over potential ‘ownership’ - the car is becoming less of a status symbol and instead part of motability arrangements.    

Is the growing popularity of PCH a sign of a wider shift in consumer car-buying behaviours?

Most definitely. Prior to starting our PCH funding venture we undertook a thorough review with Lancaster University on the car market. This confirmed our thoughts that the younger generation is more concerned with usership than ownership and instead wants digital platforms to underpin their car requirements. In essence, the car purchase is becoming less emotive and more transactional in the same way it’s happened with the mobile phone.

How is WLTP (Worldwide Harmonised Light Vehicle Test Procedure) regulation affecting PCH uptake?  

WLTP hasn’t affected our PCH funding and has, in fact, helped in some areas of PCH. Our PCH providers tend to present special offers rather than a ‘user chooser’ selected car, which means our providers concentrate on the cars they can easily obtain at that point for a price the consumer will pay.

Given WLTP has affected different manufacturers at different times, the impact has been manageable for PCH suppliers who can reflect what is available in the market place at that point. Contrast this with business contract hire, where most orders allow for the company to choose what the driver has selected, down to make, model and extras and if it isn’t available they have to wait or reselect. My contract hire customers tend to have PCH customers who want to be led by what is available and what special deals they have at the time.

PCP has been criticised for being too complex for consumers to understand. Could the FCA’s (Financial Conduct Authority) findings on industry transparency spell the end for PCP’s dominance in the market?

I don’t think it will be the end of PCP because there is a market for individuals who want more backend options and for those who may want to own the car at the end date. However, I do believe that there will be a natural move to PCH for those drivers who never intended to own a car on PCP and see PCH as a better fitting product. 

Do you think the FCA and the industry will encourage further PCH uptake in the wake of the report?

I don’t see the FCA as a main influencer to PCH uptake - I see that influence coming from consumers’ requirements and from suppliers building what they require.

How do you think the increased digitalisation of products will affect the motor finance industry?

I predict the digitalisation of car finance products both in Business Contract Hire and PCH will be huge in the next few years. We’ve seen our contract hire customers develop online PCH platforms that give their customers exactly what they want, with ease. Our contract hire customers allow their end users to select cars with their desired mileage using an easy-to-use web portal that controls the whole process, from watching walkaround videos of potential cars to receiving all their documents via the web portal, which can be signed via e-signature.

We are investing heavily in helping our partners develop a more digital environment because it can create a USP, especially given how millennials are increasingly viewing a car purchase in the same they would a mobile phone purchase. In essence, it’s becoming more transactional.       

PCH has struggled to get off the ground in the used car market. Why do you think that is, and what could be done to remedy this?

I would agree that used PCH has struggled but this is because the used car market always follows – from a product perspective - in the wake of the new car market.  60% of the contract hire companies we fund PCH for now fund used assets on PCH and they are starting to market this heavily. This is a big benefit for both the consumer and the contract hire company since the consumer may not always want - or afford - a new PCH vehicle or indeed find a potentially large deposit.  The contract hire companies also tend to have a large number of ex-fleet vehicles that have been owned from new. These are assets that can be used for used for a PCH offering, so it’s a win-win.