2025 has already been a big year for the team here at Close Brothers Motor Finance Ireland. Earlier in the spring we launched an innovative new personal contract plan (Close PCP) finance product. Of course, it’s easy to say any product is innovative. So, what do we mean by this?
The Irish car market has a problem. As it stands, 70% of motorists in Ireland prefer PCP deals when it comes to financing a car purchase according to carzone.ie. It’s easy to see why, PCP means lower monthly repayments and a greater deal of flexibility with the option to own, return or exchange a car at the end of the finance term. Given this, when it comes to car finance, the Irish people are voting with their wallets.
But despite accounting for a third of car purchases overall, PCP deals only account for 5% of second hand car purchases in Ireland. In other words, the market isn’t keeping pace with consumer demand. This isn’t only bad for business, it’s also bad for drivers, limiting choice and decreasing affordability. So, what’s going wrong?
The issue we identified is depreciation risk. Cars lose value the more miles they clock up and the more time they spend on the road. Likewise, the entire market is subject to macroeconomic shock too. What if tariffs make parts harder to import? What if a recession hits and purchasing power decreases?
There are a range of complicated risks related to the market as a whole and individual vehicles that can impact value. A PCP deal locks in an assumed value for a vehicle over the course of the contract, which could be up to five years, during which a lot can happen. This risk disincentivises car dealers from offering PCP on used vehicles as they have traditionally had to accept this risk themselves. This is where our Close PCP product comes in, and our innovation.
As a bank, we can better absorb and manage risk and macroeconomic shocks than an individual dealer can. So, we’ve designed a product (Close PCP) that takes risk off the forecourt and onto our own books. Essentially our PCP guarantees the minimum future value of a financed vehicle, meaning less risk for dealers and therefore a much greater range of second hand vehicles coming to market with PCP financing options for consumers.
This minimum future value guarantee, the first to apply to the whole used car market – aims to break the deadlock in Ireland’s used car market and empower car dealers to offer PCP finance on a greater range of vehicles without the risk. CarsIreland.ie currently lists around 24,000 vehicles which qualify for PCP deals that may have previously been too risky for dealers to offer with PCP.
As I told the Irish Independent recently, this is good news for drivers, meaning more choice and lower prices on higher-spec second hand cars. It’s good news for Ireland in that newer cars are cleaner cars and it’s good news for dealers, meaning they’re no longer hamstrung in what they can offer their customers by the risk of depreciation.
And, now that our product is live and the market is having a chance to respond, it’s clear that we were correct in identifying this gap in the market. So, what next?
Well, as dealers across the country learn more about Close PCP and Irish motorists suddenly find a much broader range of second hand vehicles within the scope of what’s available, we are looking forward to watching this product continue to evolve. We’ll shortly be launching a product calculator which will bring even greater transparency to our product so, keep an eye out for that.
