More British motorists than ever before are choosing to buy a car on finance, rather than purchasing vehicles outright. As the flexibility and affordability of car finance in the UK continues to grow, it’s a trend we won’t be seeing the back of any time soon.
Nevertheless, a worrying new report published by a CarGurus suggests that many UK car finance customers have little to no idea how much they’ve borrowed. In fact, a whopping 47% of car finance customers don’t realise how much debt they are in.
This amounts to approximately three million British motorists, blissfully (or otherwise) unaware of the total costs of their car finance deals. A finding that’s only likely to further the concerns of critics, who continue to argue that deception and the provision of misleading information are rife.
Remarkably, this was just one of a series of troubling findings the report from CarGurus brought to light. Another being the extent to which British motorists have no idea what’s contained in the small print of their existing car finance contracts. Almost 90% stated they either didn’t understand the small print, or hadn’t bothered to read it at all.
Even more surprisingly, more than 30% of respondents stated that they did not realise the submission of credit applications in excessive numbers could impact their credit score.
Irrespective of such issues, the popularity of the various car finance options in the UK continues to grow. In fact, it’s estimated that around 90% of all new cars purchased in the UK are acquired through some kind of vehicle finance. Watchdogs are therefore worried that motorists in general may be fuelling a new kind of debt crisis.
In total, the survey found that 47% of drivers who purchased a vehicle on finance had no idea exactly how much they had borrowed. Where the value of the vehicle itself may be known, overall borrowing costs and interest rates are often overlooked.
In addition, almost two thirds (63%) stated that they had entered into a PCP agreement with a limited mileage allowance, but had no idea what this limitation was. All PCP contracts include mileage restrictions as standard, after which potentially heavy penalties are payable for breaching the terms of the agreement.
Despite all this, more than 90% of those surveyed stated that they believed they had a solid understanding of car finance and how their chosen car finance options worked. This, despite the fact that 53% of those who had entered into such deals didn’t actually know what PCP stands for.
Speaking on behalf of CarGurus, James Drake warned that the complexities of vehicle finance should not be underestimated.
‘Car finance can be quite complex and when we commissioned this research, we expected to find some level of consumer misunderstanding,’ he said.
‘What we’ve discovered goes far beyond misunderstanding and clearly needs to be addressed,’
‘The fact that 47 per cent of drivers with a car on finance couldn’t tell us what they had effectively borrowed is mind boggling,’
‘Car finance is a valuable tool, but consumers need to take more time to understand and educate themselves, as well as making sure that they only deal with reputable dealers who take the time to explain finance products properly.’
The Bottom Line…
Once again, experts are urging current and prospective car finance customers to consider their options and their financial situations with extreme care and attention.
Unless you familiarise yourself with every detail contained in the small print of your contract, you’ve absolutely no idea what you’re signing up for…or getting yourself into. – poorcreditcarfinance.co.uk