VOLKSWAGEN Financial Services (UK) has dismissed pessimistic forecasts surrounding the future of personal contract purchase schemes as 'little more than scare-mongering'. Fears have been mounting that this year's sharp decline in residual values will see thousands of PCPs end in negative equity with cars being worth less than their guaranteed minimum future value.

But this week VWFS chief executive officer Malcolm Hill said: 'The current commentary on reduced residual values and thousands of PCP customers losing out appears to have parted company with reality. Time will be the true judge of the PCP product and suggestions implying a negative equity scenario are a little extreme.'

Contract hire company chiefs are split on the likely success of PCPs in the marketplace with some, such as Arriva Automotive Solutions managing director Len Clayton championing their cause and others, such as Richard Koster, managing director of Paragon Vehicle Contracts, dismissing PCPs. Defending VWFS's PCP scheme Hill said: 'To embark on a route of providing the lowest possible monthly repayments would be sheer folly for anybody who is in this business in the long term. We, and other responsible manufacturers, work towards customers having value left in their vehicle which can be used towards the next sale.' But he hit out at unnamed lenders saying: 'If anybody deserves close scrutiny it is certain high street lenders whose products masquerade as a PCP but in reality are nothing better than a deferred lump sum loan with no guaranteed minimum value, leaving the customer potentially high and dry.'