Monday night’s episode of Dispatches on Channel 4, discussing how car finance is sold in dealerships, generated some strong reactions from car sales executives on social media. We invited Fiona Duffy, a sales executive in a franchise dealership for a volume car manufacturer, to explain the sales process from the other side of the sales desk and respond to some of the claims made on the show.
I don’t watch a lot of television, so it’s even less often that I’ll get annoyed at a programme, making it a surprise even to me that I’m writing about one.
On Bank Holiday Monday, Channel 4 aired their latest episode of consumer affairs programme Dispatches, entitled Secrets of Your New Car, about how the rise of Personal Contract Purchases, or PCP, is ripping off new car customers.
The programme shifted through a few different topics – far too many to cover in detail in its time slot – and seemed to have as its main focus that car dealers are only out to rip people off or to get a sale any way they can.
First off, I know that PCP agreements aren’t for everyone and I’m not naïve enough to think that there are no less-than-scrupulous sales people about. They are by far the minority though. The episode also touched on dealerships potentially using PCPs to sell diesel cars to unsuspecting people and the possibility that car finance will be part of the next financial crisis if and when it happens.
I work as a sales executive for a main dealer, selling new and used cars, with about a 50/50 split between the two. Far more people buy new than used cars on finance, with a heavier weighting towards PCP on new.
Manufacturers like PCPs because it gives a higher, although far from guaranteed, chance of renewing a customer more frequently. And renewals are important, I’ll come back to that.
Customers like PCP because it gives them the chance to buy a better car for their monthly budget than a standard hire purchase and the chance to change cars more regularly.
Brands throw all sorts of offers at buyers to make these deals more and more attractive, with low (sometimes zero) rates of interest and huge deposit contributions. Everything is clear and in writing before anything is signed.
Every customer is given something called an Initial Disclosure Document, detailing:
- the Dealer Principal’s contact details
- information about the Financial Conduct Authority (FCA), the body that regulates the industry
- the Financial Services Compensation Scheme, should you have any cause for complaint
- an overview of the steps of the sales process
It details that we offer finance and insurance products, and that we earn commission for doing so. We are up front and transparent. We have to be.
Explaining finance to customers
One of the ways Dispatches tried to make us look dishonest was by saying that people aren’t offered PCH contracts and inferred that these are comparable to a PCP. Although the monthly payments are sometimes lower, they are a very different kind of contract, often have stricter terms and can be far more difficult to end early. Crucially, they offer no option to purchase, so are unsuitable for many people who visit a retail showroom.
Although some places may offer both kinds of contact, many retailers have a dedicated fleet sales team who will deal with PCH as well as fleet and company cars. If you were to ask me for a “lease,” I’d go through the differences between PCP and PCH and if that’s the way you want to go, I’ll pass you on to a person who specialises in it.
Wouldn’t you rather deal with someone that knows it inside-out? I deal with purchases, not hire, but I certainly don’t want to push you a way that isn’t suitable or for the business to lose a customer, even if I can’t personally sell you the car.
A PCP gives a lot of protection. It’s essentially a restructured Hire Purchase agreement, with an optional final payment. That payment is set at the point of negotiation with the customer and is based on the term of the contract, the mileage that you tell us and a conservative estimate of the future value of the car. Lower mileage gives a higher end value and lower monthly payments.
Customers are not always honest
If the customer isn’t up front about their mileage in an effort to make their payments lower, they’ll end up with a car that not only isn’t worth what we thought it would be, but will also incur a financial penalty if they decide to hand it back.
Be honest. If you’ve got your annual mileage right and the car is worth less at the end of the PCP due to a drop in the market, it’s the finance company’s problem, not yours. That end value is your protection from excess depreciation. You don’t get that with a normal Hire Purchase.
If you’ve looked after your car (which you should – it’s not yours until you’ve finished paying for it. You get what you pay for with cheap repairs.), then it’s the safest way of buying a new car to protect you from uncertain values.
Which, in the current climate, brings me to diesels. Diesel is not suitable for everyone. In fact, with the improvements in the economy of petrol engines, they’re suited to fewer people than ever before, especially now that the cheaper rates of road tax are no more.
We are not trying to use PCPs to try and shift diesel cars unnecessarily. The undercover reporter sounded surprised that the sales executive didn’t know the NOx emissions of a car being sold. That information isn’t published in new car brochures, so how would we know?
All new car registrations since September 2015 have had to come under Euro 6 emissions regulations, so we can reassure that they are cleaner than they’ve ever been and that’s a restriction that’s only going to get stricter.
Diesel sales have dropped noticeably since “dieselgate” and due also to people being uncertain about the future status of these cars. The fact remains though that published MPG figures are still higher for diesel cars, which for many customers is their main buying factor.
I am not going to try and push you towards diesel. It’s more likely to be the exact opposite, especially if you do low mileage. (The brand I work for doesn’t yet offer a hybrid or electric option.)
Keeping the customer happy
Secrets of Your New Car made it seem as though we are all still stereotypical old-school Arthur Daley-type sharks out to get a deal whatever the cost to the consumer. As I said at the start, I accept that a few people like that are still around, but it is very much the minority. One sales manager I know said, “we’re more likely to bend over backwards and give you the shirt off our backs to make you happy.”
And we need you to be happy. More than ever before we are living in a society that is constantly rating itself on customer satisfaction scores. If I don’t get my five stars it will genuinely affect my pay. A sales executive earning money is not a bad thing. I still have to pay my rent the same way you pay yours.
After three years at the dealership, a lot of my business is repeat custom. Renewals, many on PCP. I don’t just want you to come back, I need you to. If I’d ripped you off or forced you into an unsuitable car or deal, what chance would that give me?
And one last thing – I’m a woman in a male-dominated industry. Sometimes people ignore me in the showroom, assuming I’m a receptionist rather than a well-trained and knowledgeable sales executive. Sometimes on the phone, a customer will insist on being put through to a salesman.
It’s difficult enough without programmes like Dispatches pandering to the stereotype and referring only to men, even using phrases like “slick-suited salesmen” or “there’s an army of salesmen out there.”
I’ll finish as I tweeted at the time. I’m very proud of my job and of the customer service I give. Dispatches never once mentioned the vast majority of us who are honest and care about finding the best deals for our customers.
I was left feeling totally undermined. Believe me, some of the monthly payments I see make my eyes water, but if they are affordable to you, then who am I to judge? Just please don’t judge me by my career.