Drivers who have their car on finance have been warned they are forking out £6,000 in interest. Motorists with a car finance policy have been urged to read the small print over sky high interest rates, with motoring groups and road experts sounding the alarm.
Edward Cockill, Director of Uckfield Motor Services, warned: “What’s happening is car dealers were allowed to set their own interest rates on the finance packages that they were sending to their customers for the cars. So the finance company would lend let’s say 6.9 per cent, the car dealers were allowed to input whatever interest or percentage on top of that.
“So for example I’ve just put some figures in there. This is on a £20,000 loan, so say for example the lender would allow the car dealer 6.9 percent, the dealer could then bump that up to 10.9 per cent for example. So 6.9 per cent over five years you would be paying £395 per month and over the course of that £3,700 in interest.
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“But at 10.9 per cent you’ll be paying £433 per month. So that’s nearly £40 more per month and £6,000 worth of interest over that five years. That’s nearly £3,700 more than what you would have been paying at 6.9 per cent. And what was happening is because they were selling these higher interest rate packages they were getting massive commissions back from the elders on it.
“So It’s all a bit of a storm at the moment. It’s gonna be interesting to see what comes out of this.” Drivers face paying £40 a month, Mr Cockill said, as the car finance scandal – which Martin Lewis has been shedding light on continuously – continues and deepens.
Hire purchase offers you the ability to buy your car outright with affordable monthly payments and no large final payment. PCP car finance is low monthly payments with the option to buy the car when the contract ends.
Leasing is where you effectively agree a long-term rental of a car and is one of the cheapest ways to get into a brand-new car.