Writing in the Telegraph, Honest John, who online Motor Finance readers will know we readily pay attention to, has come down on a definite side of the argument: "I don’t get involved in finance because I don’t like it," said the trader in the checked hat. Fair enough.
"Excessive borrowing is, after all, the reason why the UK is so heavily in debt."
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Yes, Honest John, except the national debt isn’t quite the same thing as personal debt. Most of the national debt was borrowed by corporations and the government and invested in the roll of a dice or the future of our children, not by our man on the high street getting in hock to buy a pasty.
Honest John goes on to advise paying cash for a depreciating asset such as a car following a readers’ surprise that, three years down the line on a PCP deal, the balloon payment on their Mercedes-Benz would be more than the value of the car.
Yes, this is a situation that can occur with PCP deals, but it’s by no means par for the course, and negative equity situations are unlikely to occur if the salesperson has done their job correctly. As I often remark, PCP is meant to be a tool to secure repeat custom – so why would dealers be out to put people off on their first try?
When Paul Bennett of Chrysalis Solmotive Group addressed the Finance & Leasing Association (FLA) seminar on used cars this month, he talked about finding the ‘sweet spot’ – where the balloon floated above the sinking value of a motor car. Delegates paid attention not because they wished to know how to make £1,000 in the short term, but because this is the optimum point to contact an existing customer and talk about retaining them on a lovely new automobile.
Nevertheless, there is still a public hesitation over finance. If a recent Populus poll is to be believed, only 21% of the pasty-eating public plans to opt for finance in their next car purchase, but 67.4% of us actually did in May, according to the FLA.
Taking a look through the internet may answer this discrepancy. Online, any of us – you, me and, most importantly, the man with the Greggs lunch – will find a plethora of money forums highlighting cases of unhelpful industry attitudes, even when calibrating for customer grievances. In the last seven minutes, between bites of my steak and bacon slice, I’ve read first-hand accounts of consumers’ experiences with finance, ranging from the potentially illegal – a dealer defaulting on a promise to pay off on an asset with a finance company after taking a car on part exchange – to the technically frustrating – whether a dealer should honour a 14-day cancellation period because the agreement was signed on trade premises, not the customer’s premises.
Stories of wildly different numbers between customer and car dealer when total finance, length of term, or interest rate is tweaked one way or another also abound.
There are plenty of grim debt collection tales out there, too. The worst I found, at least as the consumer reports it, was the repossession of a car from private property involving the physical manhandling of the customer following a single missed payment, and that due to the recent technical issue of a large high-street bank.
These are isolated incidents – but they get around. And they make people nervous. Finance providers must make monthly costs and interest rates and, most importantly, terms and conditions both apparent and transparent to customers. Not only are they bound by legislation to do so; they have a duty to represent the industry-wide willingness, published many times over
in this magazine, not to hard press customers, not to repossess cars, and not to earn a
name as a gang of brutes.
As Jamie Dixon of GForces explained to the FLA Seminar, let your customers be your ambassadors online. If customers are fully aware of the paperwork in front of them and car funders are thinking of their reputation, judged by both the big names of the broadsheets and the anonymous multitudes of online forums, those left bitter by the experience should have nobody to blame but themselves.
fred.crawley@vrlfinancialnews.com
