A couple of things strolled into the orbit of my consciousness over the last few weeks.
First there was this from The Greatest Central Banker in the World. (I am a fan of Cockney rhyming slang.) In fact if you search Google you get an excellent list of contradictory stories, but hey?)
Then there was this from Autocar.
And today this from the Telegraph.
Lets look at this whole PCP thing for a bit and take the Telegraph's Merc figures as a basis.
The Merc is £35,205. That's actually £29,338 for the car and £5,867 VAT.
The net residual value at year 3 of £15,950 (which looks like the dealer trade in value, not the retail price which is about £18,500, although the example in the link is under average miles). So let's assume the residual value is £17,250. The actual 'depreciation' is £29,338 minus £17,250, that is £12,088, or about £4,000 per annum. The monthly rental of £344.59 is a total of £12,405.24 - which, surprise, surprise, is the same as the after VAT depreciation.
The VAT is then 50% of the depreciation. And that component of the PCP finance is off balance sheet borrowing for the government. Or government income financed by the car buyer. Or the £5,999 deposit pays the VAT.
It is also important to note that frequently you get three years full serving thrown in, and on some deals that can include tyres. And even motor insurance.
I also know that the factory gate price of a car is bout 50% of the forecourt price. That 'factory gate' ratio probably includes design and development and other overheads, since I have heard it tell that the actual build cost can be as low as 20% of the forecourt price.
So WTF is Carney on about? The dealer sells a car. The maker gets his money. The buyer gets a maintenance free reliable 'transport solution', and the government gets its tax. And after three years, by my usual wise buying, I can get a used car in excellent condition at an excellent price that'll probably be good for 250,000 kilometers. Even the bank financing all this makes a modest return against a security.