SAVE YOURSELF
‘If you see it, leave’ – five red flags when buying car finance that should send you running from the dealership
Including how to get the best deal on insurance
A CAR finance expert has revealed five red flags that should send you running from the dealership.
Kimberly Kline revealed how you can spot a dodgy deal and even knock hundreds off your bill.
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Speaking on YouTube with Car Edge dealer team Ray and Zach Shefska, Kimberly urged drivers to look out for sales tactics designed to line finance managers' pockets.
Contract concern
First of all, Kimberly warned motorists to be cautious if they are asked to sign more than one bank contract when agreeing to their loan.
This is particularly important if the contracts are with different financial institutions.
She explained that this could suggest that the approval for the loan has not yet been secured, placing your deal on a rocky foundation.
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Kimberly said: "Don't do it.
"Don't ever sign two bank contracts in the same sitting.
"There are many reasons for this and none of them are good."
Added extras
Secondly, Kimberly urged drivers never to allow loan brokers to tell them that the bank providing the money requires them to purchase extra products as part of the deal.
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This would usually be some form of insurance that the dealership is trying to sell.
It would be very unusual for a bank to make such a product a condition of a finance agreement.
Martin Lewis warns EVERYONE who owns a van, car or motorbike they could be owed £1,000s
Instead, you should be free to shop around for your own coverage, which can often be found at a cheaper rate than might be offered in a dealership.
Warranty worry
Similarly, don't let the broker tell you that the loan provider would like you to take out the extended warranty they offer on the motor.
Kimberly said: "When it comes to products...the bank doesn't care if you buy anything extra or not."
Unlike insurance, the warranty is completely optional and will almost never be a requirement of purchasing the car.
Slashing rates
On the topic of warranties, Kimberly advised that Brits should "run" out of the dealership if they are offered a discounted interest rate on their loan in return for buying the warranty.
Not only does this indicate that the broker could have previously afforded to offer a lower interest rate, but it also suggests they are willing to try and sneak optional products worth hundreds onto your bill.
Like insurance, the warranty can usually be found from third-party providers, who may well offer it for less than the dealership rate.
What is the car finance compensation investigation?
What is being investigated?
The Financial Conduct Authority (FCA) announced in January that it would investigate allegations of "widespread misconduct" related to discretionary commission agreements (DCAs) on car loans.
When you buy a car on finance, you are effectively loaned the value of the car while you pay it off.
These loans have interest payments charged on top of them and are often organised on behalf of lenders by brokers - usually the finance arm of a dealership.
These brokers earn money in the form of commission - a percentage of the interest payments on the loan.
DCAs allowed brokers to, to a certain extent, increase the interest rate on a loan, which in turn increased the amount of commission they received.
The practice was banned by the FCA in 2021.
Who is eligible for compensation?
The FCA estimates that around 40% of car deals may have been affected before 2021.
There are two criteria you must meet to have a chance at receiving compensation.
First, you must be complaining in relation to a finance deal on a motor vehicle (including cars, vans, motorbikes and motorhomes) that was agreed before January 28 2021.
Second, you must have bought the vehicle through a mechanism like Personal Contract Purchase (PCP) or Hire Purchase (HP), which make up the majority of finance deals and mean you own the vehicle at the end of the agreement.
Drivers who leased a car through something like a Personal Contract Hire, where you give the car back at the end of the lease, are not eligible.
You can check whether you might be owed money and submit a complaint using Martin Lewis' free tool here.
Keep copies
Finally, it is essential to keep copies of all documents related to your finance agreement and to make sure you will be able to do so before signing anything.
This is vital in the event of any dispute down the line so that you can refer back to the terms of the agreement.
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Kimberly added: "Make sure that for every one [the broker] puts down on the desk, make sure they put one for you down next to it."
And if they refuse to give you a copy, then don't sign anything and leave.