As a society we are changing the way we think about ownership and how we pay for things. Tusker outlines the changing attitudes to purchasing a consumer item as expensive as a car
Very few people can afford to buy a brand new car and as such, credit in the form of a car loan or finance package from the dealership are often considered to fund the purchase. The unfortunate thing with cars, is that they are in constant need of funds - there are also servicing and maintenance, insurance and breakdown cover and a range of unexpected bills that make it almost impossible to budget accurately for car ownership.
Fortunately, motorists have a smarter option than traditional car finance, through their employer. Car benefit schemes have opened up the possibility of driving a brand new car to a much wider market. They are fully inclusive of all costs and therefore ensure that the driver doesn’t receive any nasty financial surprises. What’s more, the financial risk is mitigated by insurances taken out by the employer.
The increase in popularity of Car Benefit Schemes has played a significant role in boosting new car sales in this country. The new car industry has been one of the success stories as the UK moved out of the recession created by the credit crunch.
However, the car credit industry has come under recent scrutiny amongst concerns about levels of consumer borrowing, particularly regarding PCPs or personal contract plans. Car Benefit Schemes are very different to PCPs as they are tailored to individual employers and employees can only join if they meet certain criteria.
Employers can include a range of risk mitigations, including Early Termination Protection to ward against employees having to leave a salary sacrifice scheme early. Unexpected lifestyle events such as resignation or redundancy can be insured against. Some employers also choose to include protection for long term illness, or maternity, paternity or adoption leave which covers the cost of the monthly rental during this period.
While Car Benefit Schemes have seen a recent surge in popularity, paying for the use of a consumer item, rather than owning it outright, is nothing new.
In the 1960s and 70s, no-one owned their own TV. Companies like Radio Rentals, Rumbelows and Granada rented out TVs and other entertainment technology. Their success was based on two key factors – the price of ownership and emerging technology. TVs were expensive to buy, depreciated in value and the technology was moving so fast that models were quickly out of step with the latest developments. By renting, consumers saved money, didn’t have to worry about repairs and could always upgrade to the latest model.
That same argument can be applied to possibly the biggest single consumer purchase - a car. Cars are expensive to buy, they depreciate in value and are quickly out of date as each year manufacturers make constant improvements to their models in terms of efficiency, style and on-board technology. They can also be expensive to run and difficult to budget for when things go wrong.
We are changing the way we think about the things we ‘own’ and how we pay for them. Companies like Apple, Netflix and Spotify are changing our perceptions as we think nothing of paying a monthly fee for the privilege of using the latest iPhone, watching the latest TV shows or listening to our favourite mix of music. Yet, with these consumer models, we never actually own anything – the phone handset, DVD or music track.
With a consumer item as expensive as a car, it is surely time to reconsider what it is that we actually need. Is it the physical entity of four wheels and an engine, or is it simply the convenient use of our choice of car whenever we need it? Do we want to be burdened with disposing of four wheels and an engine when we want a new one, or would we prefer to simply swap it for the latest model?
If the success of Apple and Netflix is anything to go by, without even realising it we have already made the decision, that usership is the smart consumer’s choice.