Maintaining the Demand for Diesel Vehicles

Diesel vehicles are currently receiving a hard press. It is alleged that they are amongst the worst culprits when it comes to traffic pollution, and it is widely predicted that a forthcoming budget will see increased purchase tax on such vehicles and higher diesel fuel duty.

27 towns and cities are said to be considering “clean air” zones where diesel vehicles will be banned or drivers need to pay an emissions surcharge and additional parking fees, according to reports in Buy a Car on the 6th of June 2017.

Impact on motor traders

Yet, diesel vehicles have traditionally played an important role in the business conduct by many motor traders around the country. The prospect of the market falling out of the bottom of this sector is likely to be bad news for businesses already struggling to come to terms with the uncertainties over Brexit negotiations and ever-rising operating costs, including motor trade insurance.

Against this background, motor traders are likely to welcome any means of helping to maintain the demand for diesel vehicles – and those means may be found in Personal Contract Purchase (PCP) arrangements.

How PCPs work

If you are a motor trader, PCPs can offer an attractive proposition for both you and your customers.

Whatever measures might be taken by government and by local authorities, there is little doubt that diesel vehicles can have a potentially long life. This supports the principle of good trade-in values for used vehicles.

Personal contract hire allows you to retain ownership of the vehicle throughout the contract period, during which your customer is paying what is effectively the fee for rental or lease and exclusive use. Lease charges can be considerably less than repayments on the full purchase of the vehicle, so the customer may pay less for the exclusive use of it throughout the contract period.

At the end of the agreed term of the contract, your customer has the option of purchasing the vehicle for its previously agreed residual value, trading it in for another PCP or simply handing it back to you, the owner.

Insurance implications

The vehicle values guide, Parkers, offers an overview of the insurance situation for vehicles that are subject to PCPs – and this draws attention to the distinction customarily made by insurers between the owner and the keeper of a vehicle. Insurers typically base insurance contracts on the basis of insurance for the owner, but in the case of a PCP vehicle, insurance may also be arranged for the keeper.

Whilst the vehicle is in your possession, therefore, your normal motor traders’ insurance policy continues to provide cover that meets all legal requirements and the necessary protection for the vehicle.

Although some dealers may put together a PCP that also incorporates one or two years of insurance cover for the customer, once the customer has taken possession of the vehicle under the terms of a PCP, it is more normal practice for the customer also to arrange the necessary insurance.

On the vehicle’s return to you, your existing car trader insurance may once again play its necessary part.

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