Complaints about car finance increased in 2014, industry experts say (Picture © Financial Ombudsman Service)
As the number of new car sales continues to soar so the number of car finance complaints is increasing. September 2015 will mark the 42nd consecutive month of growth in the UK new car market. But with more than seven out of every 10 new cars bought on a PCP (Personal Contract Purchase), the number of people getting into financial difficulties is also set to rise.
The result is an increase in car finance complaints, the Financial Ombudsman Service (FOS) and Auto Trader claim. They are reporting an 18 per cent rise in complaints relating to Hire Purchase (HP) and PCPs, increasingly popular finance products, explained in this useful guide to car finance from the Money Advice Service. The arrival of the 65-plate registration this week will see 450,000 new cars leaving showrooms across the country. Around 328,000 of those will be bought on finance.
In 2014 the Financial Ombudsman Service dealt with 1784 complaints relating to HP, most of which related to car purchases. In 37 per cent of those cases, the FOS found in favour of the buyer. “It’s worth remembering that people are often more focused on the thrill of buying a new car and can lose sight of the small print,” warned Caroline Wells, head of outreach at the FOS.
“When making a sale we’d urge all dealers to make sure customers know what they are signing up to and to keep records of what was discussed. That means if problems crop up down the line, they can be sorted out easily.”
According to used car valuation experts Glass’s, increasing debt levels aren’t the only potential problem with this new-car boom. The company says car makers are putting their dealers under increasing pressure to increase sales, leading to more and more cars being pre-registered. This is where dealers register a car to themselves so that it’s logged as a sale even though it doesn’t have a buyer.
Rupert Pontin, head of valuations at Glass’s, said: “The new car market is 6.5 per cent up on the year, but the volume of sub-one-year-old cars is also up by 43 per cent, indicating a huge rise in pre-registrations
“We have seen an ongoing explosion in PCPs, but manufacturers are having to make these ever more attractive in order to continue to sustain growth in the market. At some point, we will reach a situation where no matter how much manufacturers provide support in terms of finance, customers will stop signing new leases. How will manufacturers then cope with huge volumes of cars leaving their factories?”
So if you’re in the market for a new car, there are plenty of great deals to be had, as you can see in our recent article on the new car sales boom. Also prepare for your shopping by checking out our feature on how salesmen are putting buyers off. Then get out there and snap up a bargain, because there are plenty to choose from.
Car finance complaints: Buyer’s checklist
- Take the time to thoroughly understand how a financial product works. Focus on things such as the monthly payments, the interest rate and the balloon payment at the end too.
- If you get into difficulty with the payments, you’ll need to speak to the finance company to try to find a resolution. However, your contact at the supplying dealer should also be able to point you in the right direction if you’re unsure who to speak to.
- It’s not just new cars that are bought on finance. If you buy a used car on HP or a PCP and there’s then a problem with the car, take the time to speak to the supplying dealer to pin down whether it’s a fault or fair wear and tear.