Confusion and regret over car finance packages revealed

A quarter of drivers who pay for their car on finance didn’t understand the options open to them when they took out the agreement, a new study has revealed.

The research into leasing by RAC Flexiloan also found that nearly 72 per cent of the 400 drivers polled didn’t shop around. Instead, they just took the first product recommended by the dealer.

This, the finance provider says, 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 to get the best arrangement for them.

Meanwhile, a study into car finance – by discounts website Voucher Codes Pro – found that more than a third of car owners on a finance plan struggle to meet the payments and end up regretting their decision to buy their vehicle that way.

Additionally, half of the 2,100 people surveyed have been unable to meet other financial commitments, such as mortgage, rent or utility bills, because of their additional outgoings.

The RAC poll also found that 30 per cent 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.

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.

“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.”

Simon Benson, director of motoring services at AA Cars, said: “With so many car finance products on the market, it can be tricky to work out what deal might best suit your needs.

“This research suggests that consumers are somewhat dazzled by the sheer variety of finance products on offer and are jumping at the first package offered without understanding all options available.

“It’s important to remember that you aren’t under any obligation to take finance products so it’s always worth shopping around and doing your research before barrelling into any financial commitment.

“The best way to get a grasp of whether a deal fits your needs is by looking at the full cost of the financial commitment, as opposed to just the monthly repayments. This should include the cost of borrowing, as well as interest and charges over the course of the loan, in addition to any possible excess mileage charges that you might incur.”