The Competition and Consumer Protection Commission (CCPC) has commenced a study into the Personal Contract Plan (PCP) car finance market.

PCP is a form of hire purchase that has become increasingly popular in the car finance market, however, the consumer body is concerned that some people may not be fully aware of the terms and conditions involved when signing up to such a deal.

Many car dealers now market PCP as their primary method of finance, according to the CCPC.

Its study will examine the experience of consumers and their understanding of PCP contracts, while also assessing the information given at the point of sale.

The probe will also analyse consumers’ understanding of PCPs, including the structure of the product and the options available to them at the end of the agreement.

Listen: CCPC discusses examination of PCP car finance market

The CCPC said the findings of the study will determine how suitable current consumer protections are for dealing with this type of agreement.

Commenting on the probe, Chairperson of the CCPC Isolde Goggin said: "From our interactions with consumers we know that PCP is an increasingly popular way for consumers to finance the purchase of a car.

"However, these products are relatively new and considering their complexity there is potential for consumer misunderstanding and detriment if they take out a product that may not be suitable for them.

"The information gained through this study will guide our future work and form an evidence base that can be used by policy-makers to assess the suitability, or otherwise, of the current consumer protection regime."

Ms Goggin added the CCPC would like to "hear from those who have a PCP agreement, particularly anyone who either experienced problems in understanding the product before buying or had difficulties after they signed up to the contract. You can contact us through our website"

Fianna Fáil spokesperson on finance Michael McGrath welcomed the examination, adding "it is in the best interests of both the consumer and the industry to ensure that this form of financing is properly regulated and is on a sustainable footing going forward.

"An obvious gap in the current regulatory regime lies in the fact that the Central Bank’s Consumer Protection Code does not apply to hire purchase agreements or PCPs.

"This means, in effect, that a credit intermediary selling a PCP is not required to ‘know their customer’ in terms of assessing affordability and the suitability of the product being sold."

Car data experts say that, according to their figures, the car finance market has grown by almost 140% over the past three years.

Motorcheck's figures show that there were 30,943 new vehicles sold under finance in 2014. 

That increased to 73,979 new vehicles sold on finance in 2016.

The car finance statistics do not distinguish between Hire Purchase and PCP agreements, but the market has witnessed a sharp increase in Car Finance in general over the past 3 years.

In 2014, a little under one third - 32% - of all new vehicles sold were financed. 

In 2016, that figure has risen to 51% of all new vehicles that were sold are under finance. 

Motorcheck believes it's a positive for the industry as it has helped fuel the increase in new car sales in recent years.

"There has been a lot of scare mongering recently regarding PCP finance. A lot of it is unjustified, and I'm sure the industry will welcome the study undertaken by the CCPC into PCP," Michael Rochford, Managing Director of said.

"Anything that will help the consumer to fully understand PCP as a finance product will also help to strengthen the confidence of those customers who are suitable for this type of product," he added.