Personal Contract Hire (PCH) leasing has become big news in car retailing and in doing so is promoting the wider appeal of leasing with its wider benefits, not least of all cashflow and affordability.
However, Allen Jones MD at financial software experts Copernicus, which provides leading-edge leasing calculator tools, is keen to ensure that businesses stay compliant when it comes to some of the promises being made.
“On a daily basis, I see and hear adverts promoting the availability of cars through PCH. What occurred to me is that these promises are so good, which in turn led me to wonder just how compliant they were with advertising regulations. Our research suggests that businesses could be placing themselves and potentially their leasing suppliers at risk.”
Copernicus asked a mixed demographic panel of consumers to review leasing promotions from a selection of 16 brokers/dealers/leasing providers based upon a basket of promotional platforms including; TV, radio, email promotion, online search and social media. Consciously subjective to mirror a customer’s car ‘buying’ journey, the overall conclusion from the Panel was that they found the promotion of PCH confusing.
In part, confusion was caused by a lack of understanding of leasing when compared to outright purchase, HP and PCP finance. Beyond this, not all promotions highlighted the type of ‘relevant risks’ that the FCA expects to be available to consumers that would support the principle of Treating Customers Fairly.
Common issues included:
• Mileage and excess mileage – it was common to find no reference to any excess mileage implications at all while one site suggested that this was likely to be ‘only a few pence’ per mile
• Scant, or no information regarding end of contract vehicle condition requirements
• A lack of clarity on the issue of ownership at the end of the agreement period
Beyond these potential compliance issues, the panel identified other areas of confusion:
• A common misunderstanding of the ‘rentals in advance’ as a concept, as opposed to a deposit, or ‘initial payment’
• Confusion about the rationale of a price differential between business and personal users
• An absence of ‘traditional information’ – cash price of the car and the type of Representative Example & APR information most expected to experience
Allen concludes: “There was a broad span of quality in the promotions assessed and certainly the brevity of platforms such a social media, create their own challenges.
“However, the overall conclusion is that with the likelihood that the growth in PCH activity will lead to greater scrutiny; providers can benefit by providing a more customer-centric experience. Clarity in the product and risks should be very transparent at an early stage.”