PCP & PCH – The SMART Addition

When it comes to car finance, PCPs (Personal Contract Purchase) and, more recently, PCH (Personal Contract Hire), have become increasingly popular ways to purchase a new or used car (often up to a maximum of five years old). The appeal to customers is the lower monthly payment compared with a personal loan or Hire Purchase agreement. It is achieved by leveraging the car’s anticipated future value at the end of the contract period.

A quick technical point to help clarify the PCP/PCH difference. Under a PCP, customers have an ownership option at the end of the agreement by paying the car’s agreed future value, commonly called the Guaranteed Future Value (GFV).  Under a PCH, the customer can never own the car, and at the end of the agreement, it is handed back to the leasing company. The leasing company refers to the future value as the Residual Value (RV), and it is not a figure the customer is ever likely to see. However, in both cases, this future value is of importance.

The GFV or RV is set by the lender/leasing company based upon a combination of the contracted mileage, expected condition and expert valuation forecasting of the make/model. It is on this value and the term and conditions surrounding the end of the contract that SMART insurance should be part of the conversation for every customer.

SMART Insurance

SMART Insurance is all about covering those minor ‘dings’ that, sadly, are part of everyday motoring. These can detract from the car’s aesthetic, and impact a car’s future value. If the damage is deemed excessive, such damage could also mean extra end-of-contract ‘wear and tear’ costs.

With SMART insurance, minor damage can be repaired, not only towards the end of the agreement but throughout the agreement.

  • At AutoProtect, 50% of all customers make more than one claim
  • 97% successful repairs on the first visit
  • 4.9 TrustPilot satisfaction score (SMART Insurance)

Apart from addressing any unwanted end-of-contract costs for PCP customers, there is a potential upside to the end of the agreement, maximising the car’s value.

The PCP Part-Exchange’ Bonus’

For customers with a PCP agreement, their end options include; handing the car back and walking away, part-exchanging the car for another, or paying the GFV and taking full ownership.

If the car is worth more than the GFV, then financially, it can make sense to either part-exchange it or buy it outright. SMART can help boost the car’s value beyond the fixed value of the GFV, benefitting the customer.

Dealers are always looking for high quality used cars that they can retail. If the car is presented in ‘showroom’ condition, a dealer will know that refurbishment/preparation costs will be minimal, if any, saving them time and money. Such cars can demand a higher value when compared to a similar car that needs work.

By addressing any minor damage, SMART insurance provides a win/win scenario for both customer and dealer. Customers can benefit from a better part-exchange value and dealers get ‘retail-ready’ stock.

Choosing the Right Smart Insurance

Through its dealer partner network, AutoProtect provides a unique joined-up SMART experience. Purchased at the dealer at the same time the car is acquired, AutoProtect’s SMART insurance provides customers with an easy-to-use app that enables them to self-serve their claim and once approved, make a repair booking with AutoProtect’s UK-wide mobile repair team at Shine.

Shine employees a team of fully employed highly trained mobile repair experts across the UK. Aston Martin, Ford, Mercedes-Benz, Lexus, Toyota, and Vauxhall use the team’s expertise. The quality of the team’s work has seen Shine accredited by the IMI and win the British Standards Institute, Kitemark Excellence Award two years in a row.

When a claim happens, your customers can be confident that a Shine expert will take their skills to their home or work address and that, with an SLA of 14 days, the work will be completed superbly and quickly.

It works brilliantly as the Trustpilot feedback evidences;

  • 4.9/5 is the feedback to the claims experience from over 2500 SMART customers

So, whether you are reading this as someone looking to buy your next car or as a dealer, SMART insurance is a win-win solution that every day delivers great outcomes for consumers and dealers.