Motorists offered payment holidays on PCP financing agreements

Most banks and finance houses allowing three-month payment holidays

Banks and car finance providers have moved to offer customers on personal contract plans (PCPs) payment holidays, although the volume of customers falling into arrears appears to have been minimal so far.

In response to questions from The Irish Times, the largest banks and car companies have said they are engaging with customers who hold PCP agreements.

BMW wrote to customers in the middle of last month to offer payment breaks of up to three months, the company said. “If this is of interest to our customers we asked they please provide us with some additional information that helps us to understand their personal circumstances, and then we offered and have completed new tailored agreements to accommodate their needs,” a spokesman for the company said.

The spokesman said 18 per cent of the company’s customers with a PCP agreement had sought an accommodation. And where it has seen a “slight increase” in delinquencies, that is down to people not engaging with them.


BMW is offering to spread the arrears over the remainder of their contract or to add on three months at the end of the term.

For Volkswagen, the situation was broadly similar. “It’s too early to see whether there are any major calamitous issues at the moment,” a spokesman said, adding that people were being dealt with on a “case-by-case basis”. Unlike BMW, however, Volkswagen is not committing to blanket payment holidays. The spokesman said the company was encouraging customers to make contact “and they’ll take each case individually with a pragmatic approach”.

PCPs were introduced following the economic crash as sales of new cars fell by 63 per cent in 2009. They generally involve an up-front deposit of between 10 and 30 per cent; low monthly repayments spread over 36 months and a balloon payment at the end. This payment is what the lender estimates the value of the car will be at the end of the contract.

According to a Competition and Consumer Protection Commission study, the value of the credit extended to consumers via PCP agreements in 2016 was about €800 million, accounting for just under 33,000 cars.

AIB said it has put in place payment breaks for PCP customers affected by Covid-19. Customers can avail of a three-month break, a spokesman for the bank said, with payment of the arrears spread out over the remainder of the contract.

“PCP payment break requests have been minimal to date and we are engaging with these customers to implement solutions to address their needs,” he added.

Bank of Ireland, too, is offering three-month payment breaks and this also applies to hire-purchase agreements and lease hires for both business and personal customers, the bank said. A spokesman added: “We’re not seeing any increase in defaults as payment break requests are being facilitated.”

Bank of Ireland said the arrears would fall due at the same time as the final baloon payment.

Non-bank lender Finance Ireland did not respond to a request for comment.

Peter Hamilton

Peter Hamilton

Peter Hamilton is a contributor to The Irish Times specialising in business