Finance experts TotallyMoney reveal how much customers could save by avoiding finance options at car dealerships amid the Financial Conduct Authority’s (FCA) crackdown on unfair commission agreements.
Figures from 2018-9 report the majority of people buying a car (91%) were persuaded by car dealerships into taking out credit to help them with their purchase.†
Research by the FCA found that buyers are typically sold a finance product based on a broker’s commission, rather than the customer’s creditworthiness. Dealerships receive their commission from lenders based on the interest rate a customer gets, therefore incentivising the broker to increase the rate to earn more.
This often results in customers getting a car finance deal that costs them more than they need to pay.
As a result, the FCA estimates that a customer could end up paying an extra £1,100 in interest on a four-year £10,000 finance agreement.
In light of their findings, the FCA has now put the brakes on these practices in the car finance market. Commencing in January 2021, discretionary commission models that are not in the customer’s best interests are banned.
A steer in the right direction
The finance experts are shifting gears on the traditional, commision-based model by allowing TotallyMoney customers to check their eligibility for more affordable finance options before they head to the dealership, and all results are based on what’s best for the customer, not best for the dealership.
Customers can see a larger and more varied range of products than they would find at a dealership.
At a time when many people’s financial situation has changed due to coronavirus, finding the cheapest option, with the easiest payment plan, can make a considerable difference.
Alastair Douglas, CEO of finance experts TotallyMoney, comments:
“A car is often a lifelong necessity and a large portion of someone’s monthly expenses. This is particularly important at the moment, as more people may be keen to avoid public transport amid the coronavirus crisis.
“But, car dealerships can sometimes seem unfair. The industry currently lacks competition, and at the point of sale the main focus is on the broker’s commission, rather than what is right for the customer.
“We wanted to change this. Our new car finance eligibility platform brings in creditworthiness as a top priority, so customers can get finance options that are right for their situation. We work closely with our lenders, so that customers see market-leading products that will work for them.
“At TotallyMoney, we’re on a mission to improve the UK’s credit score and help our customers move on up to a better financial future. Checking your free credit report to better understand your financial situation could help you improve your credit rating, and help you find the best deals for your next car.”
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