Research from Europcar Mobility Group UK has shown that, of the drivers who have previously used car finance, only 53% admitted to fully understanding the terms and conditions of the deal they signed.
A common issue was misperceptions of what is included in a Personal Contract Purchase plan (PCP). Almost a quarter of the 2,000 respondents (23%) considered breakdown cover as included, with nearly 1 in 5 believing servicing is part of a PCP. These are rarely included in a PCP, yet they can be significant costs associated with vehicle ownership that need to be budgeted for by motorists.
The long-term financial commitment of a PCP was also misunderstood by respondents to the research. Less than half of motorists (45%) correctly identified that at the end of a PCP a final payment must be made to take ownership. And almost a quarter (23%) admitted to not being sure if they could take ownership at the end of a PCP without making a further payment.
“Our latest research shows that having access to a car is vital – over half (57%) of those we surveyed use their car every day”, explained Gary Smith, managing director, Europcar Mobility Group UK. “However, the typical three to five year finance deal is a financial pressure that some may prefer not to have in the current economic climate.
“Europcar offers something called Long Term Flex that offers the freedom to take a ‘holiday’ from car ownership for a period of time – perhaps if circumstances change – or the driver is literally going on holiday. And there’s no penalty for taking a break, unlike the hefty early termination charges typical of conventional car finance deals.”
Potential mis-selling of consumer motor finance was covered in national press in 2017, with predominant focus on PCP and the potential failure of customers to fully understand the conditions involved.
Last November a survey of 2,486 members of the UK general public by Admiral Car Finance showed difficulties in understanding basic car finance terminology such as PCP or ‘balloon payment’. All respondents were over the age of 18, and asserted that they held a full UK driving license and drove their own car.