Is Britain’s car finance market heading for a mis-selling scandal?
The industry is worth a massive £40billion to the UK economy - but there are fears that some loans may have been mis-sold.
THOUSANDS of British drivers could have been mis-sold loans to purchase their cars, causing them to pay over the odds for their motors.
The UK’s £40billion car finance industry may be heading towards a mis-selling scandal if it’s found the terms have not been properly explained to drivers, according to reports.
A financial downturn could result in thousands of motorists being left unable to pay for their cars, analysts say, which would leave dealers stuck with huge numbers of hard-to-sell second-hand cars.
Nearly 90 per cent of new cars are sold through such deals, called personal contract plans or PCPs.
This means customers pay monthly to effectively lease their cars instead of buying them outright.
If it is found that the loans have been mis-sold, dealers could be liable for millions of pounds in compensation.
Last month, the Financial Conduct Authority (FCA) launched an investigation into the industry because it fears poorer customers may be paying too much for credit.
It plans to assess who uses the products and how they are sold. It will also check whether sales staff are carrying out sufficient checks on customers, to make sure they can afford monthly repayments.
The regulator is expected to reveal its findings early next year.
It could mean tougher rules and fines for lenders who have sold car loans incorrectly.