The financialisation of car consumption

This paper investigates the growth of new forms of personal finance used in purchasing motor vehicles - a development which it characterises as 'financialisation'. It focusses on the case of the rise of the personal contract purchase (PCP) in the United Kingdom market, and seeks to account for its growing popularity, and potential implications. It is found that the rise of PCPs is best understood as a form of financial innovation designed to help car manufacturers overcome long-term profit realisation problems produced by market saturation in mature markets. The way PCPs are structured lowers consumers' monthly finance payments, allowing them to access to higher value vehicles, and encourages more frequent purchases of new vehicles, all of which allows greater manufacturer profit realisation. However, it does so in a way which increases financial risk, to consumers, car manufacturers, and financial investors. On the other hand, manufacturers' risk exposure is limited by how the consumers' car dependency lowers expected default rates. PCPs threaten financial stability, as well as sustaining social and environmentally unsustainable consumption practices.

Automated summary

This paper examines the increase in new forms of personal finance used in purchasing motor vehicles, which is referred to as "financialisation". Specifically, it focuses on the rise of personal contract purchase (PCP) in the UK market and analyzes the reasons behind its popularity and potential implications. The study concludes that the growth of PCPs can be seen as a financial innovation aimed at addressing long-term profit challenges faced by car manufacturers due to market saturation. While PCPs enable consumers to access higher-value vehicles and encourage frequent purchases of new cars, thus benefiting manufacturers, they also bring about increased financial risks to consumers, car manufacturers, and financial investors. However, the dependency on cars by consumers limits manufacturers' risk exposure by reducing expected default rates. Overall, PCPs pose a threat to financial stability and sustain socially and environmentally unsustainable consumption practices.