Arbeitspapier

Do consumers understand PCP car finance? An experimental investigation

A Personal Contract Purchase (PCP) plan is an innovative, complex and increasingly popular form of car finance. Consumers pay a deposit and monthly payments, but instead of paying off the total value of the car, they pay off the depreciation over a specified term. We used an experiment to investigate comprehension of PCP plans and scope for improving it through information disclosure and consumer advice. A representative sample of consumers (n=100) completed choice tasks, product rating tasks and multiple choice questions to measure the accuracy of consumers' decisions and extent of comprehension. Disclosures designed to improve the processing of mileage and cost information varied between participants. The tasks were also undertaken before and after reading an advice document. The results revealed poor understanding of PCP plans based on information typically disclosed by car dealers. Participants also made mistakes, often rating objectively worse offers more favourably than superior ones. The alternative disclosures were ineffective, but consumer advice sheets did improve comprehension and reduce mistakes. A sheet with a graphical explanation outperformed one with only text. We conclude that the complexity of PCP plans raises issues of consumer protection and that policymakers might consider stronger regulation.

Sprache
Englisch

Erschienen in
Series: ESRI Working Paper ; No. 586

Klassifikation
Wirtschaft
Design of Experiments: Laboratory, Individual
Consumer Protection
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡
Thema
Personal Contract Purchase (PCP)
explanatory diagram
decision-making
comprehension

Ereignis
Geistige Schöpfung
(wer)
McElvaney, Terry
Lunn, Pete
McGowan, Féidhlim
Ereignis
Veröffentlichung
(wer)
The Economic and Social Research Institute (ESRI)
(wo)
Dublin
(wann)
2018

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • McElvaney, Terry
  • Lunn, Pete
  • McGowan, Féidhlim
  • The Economic and Social Research Institute (ESRI)

Entstanden

  • 2018

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