A report by the Daily Mail has raised eyebrows in the
dealer finance world by suggesting that dealer finance is an
expensive option for customers compared to high street personal
loans.
The report, published last Wednesday in the
Mail’s This is Money section, derided recent figures from
the Finance & Leasing Association (FLA) which showed
two-thirds of customers were opting for point of sale funds,
saying alternative personal loan interest rates starting at 6% were
available.
Go deeper with GlobalData
Louis Rix, director of car finance broker
Carfinance247, said the report was “ambiguous” and emphasised rates
as low as 6% would only be available to prime candidates.
“What [the Mail] do not say, however, is that
you’ll need to meet often very strict criteria. This may include
you having an excellent credit record (as opposed to just ‘good’)
and, with some lenders, being aged over 30 or over (or being a
homeowner).”
FLA
Response
The FLA has also responded to the article.
Paul Harrison, head of motor finance, told Motor
Finance:
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By GlobalData“Anyone looking to buy a car should consider
all their finance options – including dealer finance. However, it
is too simplistic to compare the advertised APR of a bank loan with
the cost of a car loan through a motor dealer.
“Car finance is bespoke and often include
discounts on MOT’s and servicing. The high level of competition
between dealers means there are many good deals on the forecourt
including lots of 0% deals on new cars.
“Motor finance is also secured against the
vehicle, so it is a particularly good option for people who may not
be able to get credit elsewhere. Despite comments about dealers
confusing customers, all sales staff have to comply with statutory
rules which were revised as recently as February 2011.
“Buyers can also search for their nearest ‘SAF
Approved’ showroom as a source of credible information on finance –
http://www.financingyourcar.org.uk/.
All these are measures in place to make sure people are clear about
what their undertaking before signing on the dotted line.”
Smooth-talking car salesman
Rix, talking to Motor Finance,
conceded there was “nothing wrong with shopping around” but was
surprised a national newspaper would report the availability of
6%-rate loans without further information regarding personal
finance.
“We generate a lot of business on the
internet, so we see a wide spectrum of customers,” said Rix. “Only
a very, very small percentage would apply for those rates,” which,
Rix added were often not secured against the asset of the car or
may come with termination charges and/or early settlement fees.
Certainly, the Mail’s description of the
“smooth-talking car salesman” able to push finance is one at odds
with the
opinions of many who have taken part in Motor Finance
round tables.
Instead Rix has appealed for an understanding
of a “realistic price” for car financing in an economy with
rising subprime customers – those who are no longer classified
even as ‘good’ by major lenders – and
the tightening of lending by banks since 2008.
If you have an opinion on the Daily
Mail report, please contact Richard Brown on the e-mail address
below, a selection of your responses will be published in the
June issue of
Motor Finance
magazine.
richard.brown@vrlfinancialnews.com
