Dublin: The number of consumers borrowing to finance vehicle purchases in Ireland continues to rise, with new figures from the Central Bank showing significant growth in both Personal Contract Plans (PCPs) and hire purchase agreements. The data indicates that outstanding car finance debt has increased substantially over the past two years as motorists face higher vehicle prices and growing demand for newer models.
According to the Central Bank, the value of outstanding PCP borrowing rose by 20% to €2.17 billion between January 2024 and June 2025. Over the same period, outstanding hire purchase finance increased by 8% to €3.2 billion.
PCPs Remain Popular Among Motorists
PCPs have been available in Ireland for approximately two decades, with Volkswagen among the first manufacturers to introduce the financing model to the Irish market.
The appeal of PCP agreements lies in their lower monthly repayments compared with traditional hire purchase arrangements. Customers typically make an upfront deposit or trade in an existing vehicle, followed by lower monthly instalments. At the end of the contract, motorists can either return the vehicle, trade it in for a new PCP agreement, or make a final “balloon payment” to take ownership of the car.
Drivers Increasingly Rolling Over PCP Agreements
According to Paddy Comyn, Head of Automotive Content and Communications at DoneDeal Cars, many motorists are choosing to enter a new PCP agreement rather than making the final payment and retaining ownership of their vehicle.
He noted that some consumers have moved through multiple PCP contracts, changing vehicles every few years. In contrast, hire purchase agreements eventually lead to full ownership once all scheduled payments have been completed.
Rising Vehicle Costs Driving Borrowing
Industry experts point to the sharp rise in vehicle prices as a major factor behind increased borrowing.
When PCP financing first became popular in Ireland, a new Volkswagen Golf typically cost around €20,000. Today, the same model can cost close to €40,000, while hybrid and electric vehicles have also experienced significant price increases.
The introduction of PCP financing has transformed the Irish new-car market, making newer vehicles more accessible through lower monthly payments. Industry figures show that new car registrations increased sharply after PCPs became widespread and have remained strong since.
Lower Monthly Payments but Long-Term Considerations
One of the main attractions of PCP finance is affordability. Monthly repayments are often substantially lower than those associated with hire purchase agreements, and promotional interest rates can sometimes be lower than those available through banks or credit unions.
For electric vehicle buyers, PCPs can also provide protection against rapid depreciation. If a vehicle’s market value falls significantly during the contract period, the consumer may return the car at the end of the agreement rather than absorb the loss.
However, PCP agreements can become expensive if customers choose to purchase the vehicle outright after making all monthly payments and the final balloon payment.
Consumer Protection Concerns
The Competition and Consumer Protection Commission (CCPC) has warned that PCPs are among the least flexible forms of consumer credit. Customers must comply with mileage limits and vehicle condition requirements, and failure to meet these conditions may result in additional charges when the agreement ends.
The commission also highlights the importance of understanding the final balloon payment, which can amount to several thousand euro and often represents the largest financial obligation under the agreement.
Understanding the ‘Half Rule’
The CCPC advises consumers experiencing repayment difficulties to be aware of their rights under the “Half Rule.”
Under Irish consumer credit legislation, motorists who have paid at least half of the total finance amount under a PCP or hire purchase agreement may have the right to return the vehicle and terminate the agreement without paying the remaining balance, subject to certain conditions.
Consumer advocates stress that customers considering this option should seek advice before signing any voluntary surrender agreement, as doing so may result in higher costs than exercising their statutory rights under the Half Rule.
Central Bank figures show that arrears remain relatively low across the sector. The proportion of overdue PCP accounts stands at just under 0.06%, while the arrears rate for hire purchase agreements is slightly above 0.8%.
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