Not owning a car is something which customers have needed to come to terms with an this has very happened. Historically, we were told “you must buy a car” as this was seen to be the most convenient way to run a vehicle.
However, with the onset of finance and credit, the growth of hire purchase (HP) and then personal contract purchase (PCP) really changed some of this thinking. In particular, with PCP there is an ability to return the car at the end of the contract if you do not pay the guaranteed future value/balloon, which means that the way in which the product operates is not so different to a contract hire agreement. Customers had the notion that they were owning the vehicle but the truth is that many were really not; at end of the PCP the car was being returned and so what advantage did the product really offer them? Customer habits have dramatically changed, not just with cars, but with others items – house rental, subscription models, pay per month telephones etc Long-term purchase decisions are rarely made on anything other than houses (where the younger generation are now challenging this). The need to own has been overridden by the need to change.
Cars are no different and customers want as little attachment to the goods as possible; this is why fixed costs per month for the vehicle, the maintenance, tyres, breakdown recovery and even car insurance (in limited cases) is so appealing
It allows the one monthly rental to be taken every month in the knowledge everything is being managed and, at the end of the contract, it is a case of returning the goods with no pressure to keep it, change it, sell it or amend it. It is no surprise that even we are under pressure to produce more 2 year offers, as the 3 and 4 year commitments are considered too long.
So what does the future hold for leasing? While we cannot predict everything, the move to mid-term solutions at fixed costs are being proffered i.e. 6 – 24 month solutions where everything except fuel is included is being tested by finance companies, manufacturers and finance brokers. Whether this will affect our industry is unknown, particularly as new electric and hybrid automotive products are being introduced. We do know things will change but in what direction, we cannot be sure.
