A quarter of drivers who pay for their car on finance
didn’t understand the finance options open to them when they took
the agreement out, while nearly three-quarters (72%) took the
first product recommended by a single car dealer without shopping
around for the best deal, new research has found.*
The study for RAC Flexiloan of drivers reveals a picture of
confusion and even timidity on the part of car buyers with a
majority not having the confidence to challenge a dealer or
finance company, nor perhaps the willingness to ensure they don’t
end up with a poor deal that costs them dear.
A third (30%) of those buyers surveyed said they felt they
had little or no control over deciding how much deposit to put
down, the size of their monthly payments and the scale of their
optional final payment, with the dealer or finance company
driving the process.
Of those drivers that ended up arranging finance through a
car dealer, a quarter (25%) said they thought the dealer was in
more control than they were and a fifth (20%) felt under pressure
to take the finance the dealer offered.
One in 10 said that they do not feel in complete control of
the payments they are making now – a worrying statistic given
what a financial responsibility paying for a car can be.
And of those drivers who have previously paid for a car on
finance and have found it difficult to make the payments, nearly
half (45%) struggled on but cut back on other expenditure, 12%
decided to hand the car back but paid a penalty for doing so,
while 6% worked more hours in order to make ends meet.
RAC Flexiloan spokesman Alastair Crossley said: “It’s easy
to see the appeal of driving away a new or nearly new car by
paying a low deposit with low monthly payments as this is
something that is used by car dealers across the country to
encourage us to part with our hard-earned cash. But our research
suggests just how in control dealers and car finance companies
are when it comes to deciding how much buyers end up spending –
which is a worry.
“Let’s face it – a car is one of the single biggest
financial commitments we can make and we should, in theory, enter
any financial agreement armed with the right information and the
confidence to challenge a poor deal when we see one. But our
research suggests that it is actually the dealer or finance
company that is really running the show. This
is something the RAC wants to begin to challenge with the launch
of our new flexible loan product, RAC Flexiloan.”
The RAC Flexiloan product offers the sorts of benefits
enjoyed by those used to popular Personal Contract Purchase (PCP)
car finance plans – including options for a low deposit and
monthly payments and a choice of how to pay off the remainder of
the balance – with the added bonuses of being able to buy any car
at least two years old from a dealer or private seller, ownership
of the car from day one and no prospect
of penalty fees at the end of the
agreement.
Much like a conventional car loan, the buyer is provided
with funds up-front to pay for the car of their choice outright –
and unlike with existing finance products like PCP this could be
anything from a car just a few year’s old sold through a main
dealer right through to a used vehicle featured on a private
listing on the likes ofRACcars.co.uk
The customer can select their deposit, monthly payments,
loan term and final payment on the Flexiloan website and easily
see how changing one can affect another – so for instance, if
they have a bigger deposit to put down in the first place, they
can correspondingly choose lower monthly payments and/or a
smaller final payment.
At the end of the agreement, customers can choose how to
pay off the remainder – either in one go, re-finance what is
remaining of the loan, or sell the car to cover the cost of the
final payment. And because they are in complete control of the
loan, there are no nasty surprises such as excess mileage charges
to pay.
Key features of RAC Flexiloan are:
· Choose
from any car that is at least two years old on sale anywhere in
the UK – you’re not tied to one specific manufacturer or
dealer
· Easily
see how changing one part of your payment affects other parts –
complete transparency of what you’ll pay
· Full
ownership of the car from day one
· No
extra charges payable at the end of the finance period
· Know
your interest rate via a quick ‘soft’ credit check which has no
effect on your credit report
Alastair continued: “We saw an opportunity to provide those
looking for their next car with a radically different offering
and one that puts them in complete control from beginning to end.
Flexiloan gives buyers the flexibility which schemes like PCP
offer, but then offers so much more: buyers can choose to buy any
car that is at least two years old and can arrange their finance
securely online, meaning there is no need for awkward
conversations with pushy sales agents.
“Just as the RAC has innovated to help its members at the
roadside – such as being the first breakdown company to provide
drivers with a universal spare wheel if their car doesn’t have
one in the boot – we are now determined to do the same when it
comes to finance.”
Notes to Editors
* Sample: RAC Opinion Panel research of 400 drivers who paid for
their last vehicle on finance
