by Lisa Edwards 21 February 2018 PetrolPrices
Most people use finance to buy their new cars, rather than buying them outright. New studies show that nearly half of people – around 3 million people – don’t know how much they’ve borrowed, and 90% don’t understand the small print of their finance agreement (such as excess mileage fees).
Almost 90% of car finance agreements are Personal Contract Purchases, (PCPs). They allow customers to pay some of the car’s value for up to five years, and then pay a lump sum to keep the car or hand it back. 91% of people say they understand car finance, yet 53% don’t know what PCP stands for!
The Financial Conduct Authority (FCA) ordered a review of the industry, based on concern over the amount of debt people were getting into to buy their cars. RAC research showed that 10% of motorists are struggling with car repayments.
It’s difficult to understand the small print in some of these agreements, so it’s important that the big issues at least are discussed. This includes mileage restrictions and exactly what type of arrangement is being discussed.