Do Consumers Understand PCP Car Finance? An Experimental Investigation. ESRI Research Bulletin 2018/9

McElvaney, Terry and Lunn, Pete and McGowan, Féidhlim (2018) Do Consumers Understand PCP Car Finance? An Experimental Investigation. ESRI Research Bulletin 2018/9. UNSPECIFIED.

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Abstract

This study tested consumers’ understanding of an increasingly common type of car finance. Personal Contract Purchase (PCP) plans have risen to prominence in the Irish market in recent years. These deals typically involve lower monthly payments than Hire Purchase (HP) deals or personal loans, allowing consumers to benefit from increased affordability. However, PCP plans are relatively complex and involve potential drawbacks that may not be properly understood by consumers. For instance, they involve some risk, because a consumer’s financial position at the end of the deal depends on prices in the second hand car market. In collaboration with the Competition and Consumer Protection Commission (CCPC), the ESRI Behavioural Research Unit designed an experiment to address two main research questions: (i) How well do consumers understand PCP plans? (ii) Can understanding be improved via disclosure or advice?

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