Ever used a broker to buy your new car? Probably not. But as the number of cars bought on leases grows, so do the number of brokers. Britain, it seems, has fallen heavily for buying cars on finance. In March 2017, vehicles worth £3.6 billion were purchased on credit agreements. Now, just short of nine out of 10 cars are bought on finance packages. A growing number of those are leases.
In 2016, the number of brokers on the books of the British Vehicle Rental and Leasing Association (BVRLA) grew by 39 per cent compared to the previous year. Industry experts are expecting similar increases throughout 2017 with escalating numbers of us turning to brokers for our new motors.
What is a broker?
If you think of a broker as a middle man saving you the hassle of doing the dirty deed with a dealer, you’re half right. Some most definitely are; others are more akin to online dealerships, except they represent pretty much every car maker going. But the main reason for the increasing popularity of brokers is that we’re turning into a nation of car leasers.
By far the most popular way to buy a new car is through the PCP or Personal Contract Purchase. However, the tide is starting to turn in favour of leasing or Personal Contract Hire (PCH) as the car industry calls it.
Mike Best from ContractHireAndLeasing.com, an online advertising platform for car brokers, explained: “The PCP is very addictive because the monthly payments are cheap. But people are getting to the end of their agreements and they don’t want to put up the balloon payment to own the car. Then they come across the PCH and find that it does what they like about the PCP but is cheaper.”
Why PCH is ever-more popular
The PCH is a pure leasing arrangement meaning at the end of the loan period, you hand the car back. What’s more, the term is the term. There are no early get-outs with a PCH, unless you want to pay a big penalty.
The reward for the PCH’s lack of flexibility is a significantly reduced monthly payment. With a Mazda3 SE 120PS, you’d pay £229 a month on a PCP if you put a deposit of £2692 down. With a PCH, the deposit on the same car will be £1145; the monthly payments £191. It’s not hard to see why people are cottoning onto the benefits.
Philip Nothard from used car valuation service CAP HPI added: “With the PCP there’s been negative press around the penalties for exceeding agreed mileages and concerns about used car values collapsing meaning people might be stuck with something that’s worthless. The PCH gets around that.”
And where do you buy cars using a PCH? From a broker. “They occupy a space in the market where you haven’t traditionally found dealers,” said Mike Best from ContractHireAndLeasing.com. Of course dealing with a broker means you have to be comfortable buying big ticket items over the internet. “But that’s the way things are going now,” Best added.