Daily Mail Investigation in to Car Finance Mis-Selling

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marksovereign

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I' don't know if any of you have seen this in the press :
Gleaming cars on road could spark next financial crash | Daily Mail Online
It'd be nice to hear everyones view.
My view is that provided you realise that on a PCP you are effectively renting the car for a fixed term and that you cant just give it back without incurring penalties ( Unless you've paid 50%) and that you are responsible for any damage or excess mileage, what's the harm in it? If you think you can afford the payments and read the contract properly?

The underlying issue is that the FCA is bothered about is that many of these agreements are securitised and sold on as bonded debt and there is potential for these bonds to become toxic as per the 2008 banking crisis if the agreements haven't been sold properly and proper affordability checks made.
 
Ignoring the source (Daily Fail), the last paragraph is quite misleading / inaccurate by itself:

"The truth is that encouraging people to take out loans despite them not being able to afford the repayments is not just a disaster for the individuals involved — it risks crashing the entire national economy."

The economy will get shafted by central government's spending habits first IMO (blank cheque book, tax the rich, spend spend spend etc).

The finance lenders assess each application based on the individual's credit history (not so much credit score, but existing credit agreements) to judge their ability to make repayments. It would be declined if they were in any doubt about that. Sometimes it's agreed with terms (needing a bigger deposit for example) or with the caveat of having a maximum lending amount.

In an age where the government pushed motorists to chop in their old bangers for the sum of £2000, it wouldn't get you into a new vehicle, so it's no surprise many went the PCP (or HP) route. In terms of PCP specifically, when you ask dealers directly, they'll say the smart way is to get to 50% through the agreement and VT, or chop it in for something else.

As you say, it's all there in black and white, and it's no more than a glorified rental until you pay the balloon, which I've never had an issue with personally. Cars these days are like white goods, they aren't built to last and consumers are less tolerant of spending money on repairs once the warranty period is up. In that respect, PCP gives the consumer the ability to be in and out of new cars quite easily every 2 - 4 years.
 
It was reported in the Guardian as well (twice):
Sub-prime cars: are car loans driving us towards the next financial crash?
Drive carefully – I can see a credit car crash up ahead | Phillip Inman

The first article explains the situation very well.

The upshot is that what are, in effect, loans, are given to all and sundry without proper credit checks (other than a credit score) and without proper reference to whether people can really afford to make the payments. i.e. are these loans being made to "sub-prime" borrowers?

All will be well as long as there is not some sort of crash meaning lots of people lose their jobs and are no longer able to make the payments.
 
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It's quite staggering how much 'mis-selling' and frankly lies I've been told by car dealers over recent years regarding PCP/finance.

The favourite starting line is always 'buy an appreciating asset, lease a depreciating one' but forgetting to mention when you lease you don't just pay for deprecation but also the cost of finance. So actually the statments should be 'lease a car, pay for deprecation pay interest on the value of the car, and pay for my commission so I can go on holiday to the Caribbean'

I had a Lexus dealer REFUSE to show me the true APR on a PCP product claiming it wasn't relevant information and just confuses customers!! When I got hold of the finance documents he genuinely didn't seem to understand how APR is worked out - or maybe was just a good actor.

One BMW dealer REFUSED to let me buy a car using my debit card until I had a 'consultation' with their finance department as he was 'concerned' I was buying cash and didn't understand the 'benfit' of buying with PCP. In the end I had to threaten to cancel the sale before they let me pay!!

Recently a family friend signed up to a PCP deal on a new Mercedes. I knew they could have bought cash, so I asked him why he went down the PCP route.... His reply 'The sales team told me PCP was best way, they showed me figures that said I don't have to pay any interest on the final payment'...What utter BS.

In short, yes you can read the 6 page terms and conditions document printed in size 6 font to work out if financing a car is right for you.....But most people are naive enough to trust car dealers, who like the banks that sold payment protection on fasle premises have no moral concerns about selling PCP using lies and misinformation.
 
But most people are naive enough to trust car dealers, who like the banks that sold payment protection on fasle premises have no moral concerns about selling PCP using lies and misinformation.

Some car dealers.
Under FCA regulations, we have to go through quite a thorough explanation of exactly what a PCP is, how it works, and carry out an affordability questionnaire. Trust me, it is not unknown for some potential customers to lie and give misinformation to acquire finance.
Car salesmen are damned if they do, damned if they don't.
In certain examples, it is cheaper to take out a PCP than pay cash for the same vehicle.
A low interest rate coupled with a healthy finance deposit allowance and early settlement will see a canny cash customer be better off taking the PCP route.
Is it wrong for the salesman to offer this option?
How would you feel if you had just paid cash for a car, but a friend told you that you could have saved another £1,000.00 by taking out a PCP? Who's fault would it be?
As a salesman, I will use every tool at my disposal to secure a sale. If this involves persuading a cash customer to take out a PCP to save them money, I consider this as doing them a favour.
 
Some car dealers.
Under FCA regulations, we have to go through quite a thorough explanation of exactly what a PCP is, how it works, and carry out an affordability questionnaire. Trust me, it is not unknown for some potential customers to lie and give misinformation to acquire finance.
Car salesmen are damned if they do, damned if they don't.
In certain examples, it is cheaper to take out a PCP than pay cash for the same vehicle.
A low interest rate coupled with a healthy finance deposit allowance and early settlement will see a canny cash customer be better off taking the PCP route.
Is it wrong for the salesman to offer this option?
How would you feel if you had just paid cash for a car, but a friend told you that you could have saved another £1,000.00 by taking out a PCP? Who's fault would it be?
As a salesman, I will use every tool at my disposal to secure a sale. If this involves persuading a cash customer to take out a PCP to save them money, I consider this as doing them a favour.

In most cases it is impossible for a PCP to be cheaper than paying cash unless there is 0% charging rate.( there is an argument as well that if the charging rate is below the inflation rate then there is a benefit too) However if there are deposit incentives from the manufacturer then that is different.
However if you are telling me that there is a discount available in the form of a deposit incentive to a PCP that isn't available to a cash purchaser then the manufacturers are just plain bonkers to let a buyer walk. The only other way to do it would be to sign up for a PCP and then cancel it within the cooling off period provided there were no penalties. That too is just wrong.
What it does basically mean is that people no longer buy on price but only on a monthly rental and it means the manufacturers can keep putting the prices up and future values increase too making it ever harder to escape from the PCP merry go round.
I think there's a place for them if you have a car allowance and need a car for work and you can get what you want for minimal outlay. Once you start putting big deposits in to a PCP you are throwing money down the drain particularly when at the end of the contract your p/ex values matches the final payment . Where do you get your deposit to go again from?
 
However if you are telling me that there is a discount available in the form of a deposit incentive to a PCP that isn't available to a cash purchaser then the manufacturers are just plain bonkers to let a buyer walk.

Nissan. £2,000.00 FDA (finance deposit allowance) if a customer takes out a PCP.
Cash or "standard" hire purchase? Nothing.
And I have done plenty of PCP deals where the customer has settled up within 2 or 3 months and has been better off than paying cash. Not to the tune of the £2,000.00 but not far off it.
 
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Nissan. £2,000.00 FDA (finance deposit allowance) if a customer takes out a PCP.
Cash or "standard" higher purchase? Nothing.
And I have done plenty of PCP deals where the customer has settled up within 2 or 3 months and has been better off than paying cash. Not to the tune of the £2,000.00 but not far off it.

So what's the Manufacturers thinking behind FDA for PCP and not for cash or other finance arrangements?
 
So what's the Manufacturers thinking behind FDA for PCP and not for cash or other finance arrangements?

Haven't a clue. I work for a dealership, not the manufacturer.
But I can only assume that PCP is preferred as it's a proven fact that a PCP customer is more likely to return to the same dealership again than a cash or standard hire purchase customer.
 
Not good really offering inducements to take just one type of finance with a benefit to the manufacturer, no wonder the FCA is interested!
 
Not good really offering inducements to take just one type of finance with a benefit to the manufacturer, no wonder the FCA is interested!

The FCA are interested in all finance lending, not just Nissan's. It's now UK law.
I was just answering gangzoom's earlier post countering his accusation of car dealers lying.
 
The FCA are interested in all finance lending, not just Nissan's. It's now UK law.
I was just answering gangzoom's earlier post countering his accusation of car dealers lying.
No I understand what you are saying , my point is that ANY manufacturer offering an inducement to use a certain method of finance will need to be able to justify it to the FCA. I know all about the FCA
 
No I understand what you are saying , my point is that ANY manufacturer offering an inducement to use a certain method of finance will need to be able to justify it to the FCA. I know all about the FCA

Well, Nissan have been doing it for ages and on the FCA "affordability" questionnaire it asks why a particular finance company has been used.
Submitting the reason "finance deposit allowance" has never resulted in negativity by them as far as I am aware.
 
So what's the Manufacturers thinking behind FDA for PCP and not for cash or other finance arrangements?
I think the high level answer is as @Smiffy 2 says - they know a customer will likely become locked in to a dealer. Also most will not settle in months so there is interest to be made.

I don't have an issue with either thinking to be honest. The second one is an issue only if the contribution was only available on high interest deals.

The FCA will no doubt find some dubious dealings but the ideas are not by themselves ripping off customers at every deal struck.


Probably........
 
Haven't a clue. I work for a dealership, not the manufacturer.
But I can only assume that PCP is preferred as it's a proven fact that a PCP customer is more likely to return to the same dealership again than a cash or standard hire purchase customer.
I have a question on this point, if I may, please?

Is the £2,000 only available to people who pay "list price" for a car, or would a customer be able to negotiate, say, a 10% discount on the list price and still qualify for the £2,000?

Thanks.
 
What it does basically mean is that people no longer buy on price but only on a monthly rental and it means the manufacturers can keep putting the prices up and future values increase too making it ever harder to escape from the PCP merry go round.

We've reached the ludicrous situation where monthly payments are plastered all over the place but it's almost impossible to find the actual price of the vehicle.

Would it be cynical of me to suggest that dealers aren't really selling cars, they are selling debts?

I had an interesting phone conversation with a salesman who said that he could "get me into" (hate that phrase) a new car AND reduce my monthly payment. My reply that if he would provide a notarised document to that effect he had a deal was met with a long silence, so I elaborated on my request. . . took him a while to realise that as I had paid cash my monthly payments were zero!
 
I have a question on this point, if I may, please?

Is the £2,000 only available to people who pay "list price" for a car, or would a customer be able to negotiate, say, a 10% discount on the list price and still qualify for the £2,000?

Thanks.

A discount would still be available, but 10% is pushing it. Front end margin on a new Qashqai is only 4% with another 3% available if certain dealership targets and standards are met.
 
Would it be cynical of me to suggest that dealers aren't really selling cars, they are selling debts?

On new cars, a salesman can only use the tools given to him by the manufacturer to help sales along. If one of these tools is a finance deposit allowance he's going to push it.
I can prove how buying a car on a PCP with a low interest rate and a healthy finance deposit allowance and settling up early is cheaper than paying cash. So I don't look on that as selling debt if the customer was a cash buyer in the 1st place and has every intention of doing as I suggest.
 
On new cars, a salesman can only use the tools given to him by the manufacturer to help sales along. If one of these tools is a finance deposit allowance he's going to push it.
I can prove how buying a car on a PCP with a low interest rate and a healthy finance deposit allowance and settling up early is cheaper than paying cash. So I don't look on that as selling debt if the customer was a cash buyer in the 1st place and has every intention of doing as I suggest.
Its still selling debt whichever way you look at it as the customer has to enter into a finance contract to get the extra deposit contribution. If it was a level playing field why is the deposit contribution not available as extra deposit to those paying cash. Yes its working the system your method but the dealer/manufacturer wants a customer who is reliant on making a monthly payment on a vehicle rather than ever owning it so they are a captive audience and if ever their circumstances change they have no equity and consequently no access to a vehicle of any description. The manufacturers would love everybody to be PCPing as they would effectively control the market and pricing rather than leaving customers with choices
 
I have a question on this point, if I may, please?

Is the £2,000 only available to people who pay "list price" for a car, or would a customer be able to negotiate, say, a 10% discount on the list price and still qualify for the £2,000?

Thanks.

If you are buying a car on a PCP you are buying a monthly rental not the car at a discounted price. The Salesperson is very unlikely to show you the vehicle cost or any discount, just the rental you pay
 
The Salesperson is very unlikely to show you the vehicle cost or any discount, just the rental you pay

God.......................
That means the order forms and final invoices I have been printing out for the last x number of years have been pretty worthless then??????
Damn.
 
God.......................
That means the order forms and final invoices I have been printing out for the last x number of years have been pretty worthless then??????
Damn.
And I wonder how many people who you've sold a PCP to actually look at them or actually read the PCP contract?
 
And I wonder how many people who you've sold a PCP to actually look at them or actually read the PCP contract?

Are you about to start a misselling complaint or have you just lost a decision on one MS? You seem to have a massive downer on PCP, credit; etc.

We bought a car using PCP a few months back, discount amount clearly displayed to us, manufacturer additional cash incentive for PCP clearly displayed to us, monthly payment clearly shown, total amount, cost of credit, explained interest calcs very openly including funding the balloon balance. We know we won't own the car until we pay balloon.

The best thing we did was go to CarWow (mod please delete if required... no personal interest in them) and the dealers gave us a cash best price and a best price for credit including subsidy. The dealer said we could buy on PCP and settle within 14 days and therefore get the lower cash price available if required.

The broadsheet press were 2 weeks ahead of Daily Mail on this story by the way.
 
And I wonder how many people who you've sold a PCP to actually look at them or actually read the PCP contract?

And that's my fault?
The customer not bothering to read them is a bit different from a salesperson not being prepared to show them.
 
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