According to a recent survey, car finance in the UK will undergo some serious changes. More and more drivers are dissatisfied by car deals and demand better conditions.
Are you one of them?
Do you, too, feel like you’re “locked in” to your deal? Would you rather get a new car every few cars instead of driving yours until its wheels fall off? Would you prefer to pay a monthly fee for service and maintenance instead of covering out of your own pocket?
Then read on – in this article we’ll tell you exactly how to get what you want. We’ll also explain why easy, flexible and short term car finance deals are not as picture-perfect as they may seem. In fact, we offer a different approach to car finance that we believe you’ll love!
Ready to save money and beat the pandemic car finance blues? Here we go …
Car finance in 2022: What has actually changed?
After the black death and the Spanish flu, the world was never the same. The same goes for Covid. A bit of a stretch, you say? We don’t think so. Clearly, by now, this is no longer just a medical issue. It affects every corner of our lives.
Including car finance!
As a direct result of massive supply issues, cars have become more expensive across the board. Importantly, used cars are no longer the ideal solution for the financially challenged they once used to be.
Driving a car is already a lot more expensive than it used to be. And it may get even more expensive.
So why are young families in love with cars again?
Many people once vowed, for ecological reasons, never to drive a car. It didn’t seem necessary, either: Bicycles, buses, trams, subways and trains were greener, more convenient and, typically, cheaper.
Surprisingly, many former eco warriors have turned 180 degree in perspective. Covid made them realise that public transport had its downsides, too. Especially parents considered the risks of taking their kids on a subway ride without adequate protection against viral threats.
Contrary to public transport, automobiles offer a sealed-off safe space which you have all to yourself and which you can keep perfectly clean. And no one’s going to restrict access to it!
And so, a whole generation thought to be lost for the industry have become potential customers. This has further ramped up demand and made cars more expensive.
It has also changed what people want out of a deal. We’ll get into that in a second.
Electric cars will change everything.
But the pandemic is not the only driver of change. In 2030, a ban on all new combustion engines will come into effect in the UK. Which means that in under a decade, petrols and diesels are on their way out – and all new cars have to be electric.
Are you, too, contemplating buying an EV? You probably are – and you should be! Needless to say, these developments will further cement the trend towards flexible, short-term loans. Not to put it too drastically, but electric cars will change everything.
Why, you ask?
Because the rate of technological progress is speeding up again.
For a long time, car technology seemed to stagnate. But over the last decade, not only have cars finally truly become more green. There have also been big breakthroughs in safety technology and artificial intelligence.
Electric cars are part of a wider development towards the car of the future. Just as with computers and smart phones at critical junctions of their cycle, you could invest in an automobile today – only to lag behind tomorrow.
Needless to say, this forces you to take incisive decisions: Make the transition to an EV now? Wait a little longer? What happens in 2030 if you buy a traditional petrol car now?
Things are moving so fast hat it seems weird to buy a car now and keep driving it for another ten years. You might just miss out on a lot of fantastic new gadgets!
This is why car finance has to change.
What do consumers want out of a car deal in 2022?
The study we mentioned at the beginning of this article, conducted by AA Financial Services, sums up the shifts in consumer demands as follows:
- Consumers want shorter car finance deals. These allow them to switch cars regularly, frequently and more conveniently.
- These new deals allow them to gain access to the latest technological improvements and to react to personal shifts in taste. If government regulations should suddenly change, they can adapt more spontaneously, too.
- Customers are no longer interested in outright ownership as much as they used to be. Instead, renting and leasing seem a lot more attractive to them.
- In line with this, customers prefer to only pay towards depreciation. This way, they feel like they can circumvent the increased costs of ownership on the market right now.
- Finally, they would like to simply pay a monthly fixed lump sum towards service and maintenance.
Do you feel the same? Then your desires may well come to completely turn the way we all finance our cars around.
A vision of car finance in the future
Of course, the increased popularity of cars may turn out to be nothing but a temporary pandemic-induced blip on the radar of history.
But if it isn’t, here are some of the key points of what the market will look like in the future:
- PCPs will continue to dominate. After all, personal contract plans offer pretty much everything that consumers expect from their car finance deals.
- PCP-like models may start appearing on the second hand market as well. It is conceivable, for example, that cars from primary PCP plans, which usually last for something like four years, are then offered to customers as second hand PCP contracts for the next four years.
- Renting and leasing may stage a comeback. Currently, due to Covid and the surrounding doubts in the safety of rented vehicles, have brought this part of the industry to its knees. But it looks likely that renting and leasing, in its various guises, are ideally suited to what UK drivers want right now.
- The used car market will most likely recover. If more people turn towards leasing-like financing models, there will soon be more cars for sale on second hand lots.
- Petrol cars and diesels will inevitably drop in price towards 2030. It is conceivable that they may inversely become sought-after at some point. But this doesn’t look very likely at the moment. (Cars are a different product from vinyl LPs, for example)
The benefits of this future
Does your ideal future look like this, too? Let’s take a look at why there are many benefits to this.
For starters, experts have advocated shorter car finance deals for a long time already. The reason being that interest payments are lower, and they allow you to drive debt-free sooner.
More importantly, switching cars regularly and more frequently does really increase your overall safety. Recently, huge advancements have been made in the field of safety technology (including better materials) as well as guided driving systems. The rate of progress looks set to continue. So with each passing year, your current vehicle becomes notably “older”.
Finally, renting, leasing and even PCPs are indeed really convenient – and monthly payments tend to be comparatively low.
Also, most leasing contracts include a fixed service charge. So whenever you have an issue with your car, you can simply get it fixed as part of the deal. You may even get a replacement model!
Then again … convenience comes at a price.
The car industry has gone through a lot of changes in the digital era. Sometimes, it’s hard to understand if these shake-ups have been to your benefit – or your detriment.
Online car markets have made it easier than ever to buy and sell a car. The effect on prices has been ambiguous. On the one hand, there is now more competition than ever. You can even research prices on the other end of the country to see if there are any great deals there.
On the other hand, just as with CDs and LPs, there are hardly any real deals to be had any more. Dealers know exactly what a car is worth and what potential buyers in their vicinity are prepared to pay for it.
Another big change has been the gradual disappearance of haggling. Instead, most drivers are content to ask for a discount online and to then either take it or leave it. This has made cars possibly a tiny bit cheaper for many customers. But it has made them a lot more expensive for many who were reasonably adept at the art.
Finally, renting and leasing – which includes PCPs ultimately – are easily the most expensive form of financing a car. They are convenient for sure. But this convenience definitely comes at a price!
What could a sensible strategy look like?
So, how to approach car finance and car buying right now?
It goes without saying that, whatever you do, it will remain hard to get a really great deal. Prices are through the roof at the moment and this will be reflected in leasing as well.
There are, however, a few steps that make complete sense. Let’s go through them all and set up a plan you can use to at least improve your chances of getting a decent car at a decent price.
1. Don’t buy an EV yet
EVs are the future and that future is arriving very soon. That said, they are still very expensive and there are hardly any second hand models to be found.
The government also shows no sign of reneging on its pledge to phase out subsidies for EVs.
Which means that, unless you have a lot of cash to spare, going electric is going to cost you.
Right now, the best thing you can do is to get a great yet really cheap transition car that can bridge the period until the market arrives at the next level. The closer we get to 2030, the more EVs will be on our roads, the more prices will come down and the more choice you will have on the second hand car lots.
2. Ownership is still better than leasing
The concept of ownership seems to be on its way out. Not just when it comes to cars. Today, we stream music and magazines, are happy to pay for subscriptions to audio books, rent household appliances and so forth. And with the costs of house ownership rising, renting has become the default mode for living as well.
Sometimes, this may be quite useful and save you money.
As we have shown, however, when it comes to cars, this is most likely not the case. Leasing is convenient and has many pros, but it is also one of the most expensive ways of driving a car.
If you want to be flexible, opt for short repayment plans instead.
3. Buying used is always preferred
Don’t believe the news of used car prices rising above those of new models. Sure, it happens. But it’s not the norm.
PCPs and leasing are great for dealerships, because they make it possible to sell new cars to financially less well of customers, who would otherwise never be able to afford them.
One could argue that they still can’t afford them – these financial models are simply so clever that few realise that.
Buying used gives you more choice, reduces waiting times, and is considerably cheaper. What are you waiting for?
4. Service packages are rarely a good deal
As we pointed out, many drivers prefer to pay a monthly fee which covers servicing and repairs.
This is interesting, because these packages of course already exist. They are usually called “dealer insurance” and dealers have offered them for ages and have often come under fire for them.
This is because such insurance-like models are hardly ever worth their money. They look as though they’re a great and simple solution. But, as experience shows, you’re usually better off simply paying for repairs as they happen.
To add insult to injury, none of these packages apply for all repairs. Which means that, when push comes to shove, it’s pretty likely that your repair won’t be covered. And even if it is, you may have to fight for your right – hardly what you bargained for, is it?
If you really need some additional peace of mind, go for a protection plan from the likes of the RCA or the AA. These don’t break the bank and include many useful services like highway support.
Easy, personal car finance at CCC
At Concept Car Credit, we want to get you in the driver seat. To this end, we focus on individual car finance solutions which take your personal needs and your financial situation into consideration.
Flexibility is essential, which means that just about every parameter of our deals can be adjusted. If you would like to pay off the loan faster, we support you in your aim. If you need more time, that’s perfectly, fine, too.
We strongly recommend buying instead of leasing and have the perfect selection of used cars to support our claim. Just drop by our Manchester showroom or visit our digital showroom to see what we have in store for you!
And don’t hesitate to get in touch if you need more information.
Our free phone number: 0800 093 3385