Credit, Collections & Insolvency News
A recent survey conducted by leading online automotive shopping platform, CarGurus, has found that a staggering 47% of drivers with a car on finance admitted that they could not specify how much they had effectively borrowed to fund the vehicle. The research found that a further 63% of people with cars on finance acknowledge that while they have a mileage restriction as part of their agreement, they could not specify what it is. Furthermore, over half (54%) of these drivers were not able to state what the penalty charges were for exceeding mileage limits.
Over half (54%) of car owners say they purchased their car using a finance agreement and a further 13% of car owners say that they would consider using one for a future vehicle purchase. Drivers exude confidence, with 91% of vehicle owners with car finance believing that they understand how finance deals work, however, when questioned about car finance in more detail it is apparent that there is a fundamental lack of understanding. These statistics coincide with growing concern in the industry about the levels of car finance being sold and the lack of consumer understanding about the agreements they are signing.
James Drake, Spokesperson for CarGurus said “Car finance can be quite complex and when CarGurus commissioned this research, we expected to find some level of consumer misunderstanding. What we’ve discovered goes far beyond misunderstanding and clearly needs to be addressed. The fact that 47% 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 research also uncovered a section of the public that is wary of car finance, for reasons that don’t necessarily make financial sense. Around a third of drivers (30%) say that they do not have a car on finance and would never consider it. These drivers claimed that their reasons for not doing so were, ‘buying a car outright’ (72%) and ‘the interest is too high’ (39%). One in three of all vehicle owners said that they did not consider finance to be trustworthy, although only 8% went so far as to say it is ‘a scam’. Nevertheless, 57% of car owners, including those who have a vehicle on finance and those who don’t, described finance as ‘just a way for car dealers to make money.’
Commenting on this aspect of the research, James Drake said “To write off car finance completely is almost as financially naïve as not knowing how much you have borrowed. Buying a car outright can be costly and a well-structured finance deal can protect consumers from depreciation and make high-value cars more affordable. As ever, our advice is that going through the right dealer is essential. A professional dealer will always explain finance products clearly and concisely to help the customer make the right choice. Ultimately, some buyers may just prefer not to use finance products, but we think it would be short-sighted to disregard them on principal, especially when you consider that they could represent a more cost-effective solution in some circumstances.
CarGurus is all about helping consumers to have more trust in the car market and we have today published a series of guides that will help consumers navigate the car finance landscape and have a greater understanding of the financial products available.The firm hope that this will help the half of consumers (53%) who do not know what PCP means, including the 2% who thought it was a type of throat sweet.”
Highlights from the report include:
