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Car loans hit £41 billion

Both The Daily Telegraph and The Times are reporting that the car finance market could be heading towards a new mis-selling scandal.

  • Over the past eight years loans to purchase new cars have trebled to £41 billion a year.
  • Car sales are booming with the Society of Motor Manufacturers and Traders reporting a record 2.69 million new cars registered in 2016.
  • 90% of new car sales are now financed by personal contacts purchases.

Many customers are sold car finance without the terms being properly explained and analysts are concerned that thousands of drivers are at risk of being unable to keep up payments. The Finance Conduct Authority has confirmed that it is investigating and regulators could enforce tougher ‘mortgage-style’ affordability tests.

Most reputable car companies are governed by strict financial rules and rely on credit checking agencies.  But in certain cases, commission structures and targets are forcing salesmen to sell unaffordable finance to over-stretched households. More stringent financial regulation may affect new car sales and also if thousands of customers are unable to keep up with their payments the market could be flooded with a glut of second hand cars.

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