The use of hire purchase in the Irish Car Market is under review after it was commissioned by the Department of Finance. Personal contract plans have increased considerably over the past five years from 14 000 to 126 000. This was the findings of Central Bank, while the plans have been available for car dealership clients since 2013, the protection of the consumer under the consumer protection act is under speculation. The question lingers if consumers understand what they are getting themselves into when signing a PCP loan agreement. Astonishingly many enter into these agreements completely blind and by the time realisation is reached, it’s too late to back out.
How PCP Works
Under these kinds of contracts, consumers pay a deposit which is followed by monthly payments over a pre-determined period which is usually three years. After the specified period, the consumer can either return the vehicle to the dealership or pay a pre-determined settlement amount or guaranteed minimum value. The other option is that the consumer can take out another contract on a new car. The difference between the guaranteed minimum value and the market value of the car will be put towards the deposit of the new car.
The Central Bank and the Competition and Consumer Protection act have both taken it upon themselves to delve deeper into these loans and the regulation thereof. The ongoing argument of who is responsible for the loans is disturbing, the banks are determined the responsibility lies with the CCPC while the CCPC believes otherwise. The spokeswoman for consumer affairs has spoken out, she feels consumers may not be fully aware of the financial burden and implications of such contracts. Consumers may find themselves trapped in a PCP that they cannot afford to end and the PCP contract just keeps rolling over and the consumer must keep coughing up the dough.