A recent investigation by the Financial Conduct Authority (FCA) has suggested that prospective car buyers may be overcharged by as much as £1000 when taking out loans for a new car. The discovery has been disputed by the Financing and Leasing Association. Investigation In recent years, finance from car dealerships caused a rapid increase in […]

A recent investigation by the Financial Conduct Authority (FCA) has suggested that prospective car buyers may be overcharged by as much as £1000 when taking out loans for a new car. The discovery has been disputed by the Financing and Leasing Association.
Investigation
In recent years, finance from car dealerships caused a rapid increase in consumer credit. This led to the FCA launching an investigation in April 2017. The focus was on identifying potential conflicts of interest and a lack of transparency in the motor finance system. It studied the contracts made between dealers and lenders from 2013 to 2016, as well as data from lenders between January 2017 and July 2018. Personal contract payments (PCP) account of three-fifths of car finance arrangements. Prospective buyers may rent the car for a period of three or four years. At the end of this time, they have the choice of returning the car, making a residual payment to finalise an outright purchase or using that residual amount to help buy another vehicle. An average motor finance deal is for about £10,000.

Findings

The problem the FCA found was that the setting of in...