The City watchdog has confirmed proposals, first outlined last week, to support those in car finance agreements facing cashflow issues due to the Covid-19 pandemic.
The Financial Conduct Authority (FCA) has consulted with lenders and the wider industry to agree a package of measures, including a three-month payment freeze for those with temporary difficulties meeting finance or leasing payments.
Firms should not take steps to end a finance agreement or repossess a vehicle from those who are experiencing “temporary financial difficulties”.
Customer contracts should not be altered for the same reason – for example, by recalculating PCP balloon payments at the end of the term because the car’s depreciation has worsened due to pandemic-related reasons. Firms should also “work with the customer to find an appropriate solution” if the customer intends to keep the car at the end of a PCP agreement but cannot afford the balloon payment due to circumstances arising from the virus.
The measures are part of wider plans targeted at payday loan companies, pawnbrokers and operators of buy-now-pay-later finance schemes. They will come into force on 27 April.
Christopher Woolard, interim chief executive at the FCA, said: “We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments."
The measures also call for an “alternative solution” if a payment freeze isn’t in the interest of the customer, including “the waiving of interest and charges or rescheduling the term of the loan”.
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I paid for my car outright.
Can I have some free money p[lease.
Read the smallprint
Same here, I'm one of the 5% who prefers to buy my cars. ( according to the industry it's 5%, a figure I do not believe. If you'll excuse the pun, it's in their interest to promote finance because they make more money that way ).
But it's not all good news for borrowers. The finance industry are cleaver in saying they're able to provide a 3 month payment holiday, but that's not to say forget about the payments for 3 months, it means the original money still has to be paid but I'm almost certain that those 3 months will attract extra interest. So the original loan will be plus 3 months interest. Finance companies aren't charities, they don't agree to altering contracts unless they can profit out of it.
Spellcheck!
I've never heard of the term saloon payments - I think the author meant balloon!
But surely it's wrong that the finance company should even consider altering the balloon figure, this is pre-determined at the start of the loan, and is normally a pessimistic figure to protect the dealer and persuade the customer to repeat buy. On the other hand, just who is going to pay for customers benefitting from a payment holiday. Surely they must be expected to pay back the full amount of the loan plus any interest as per the original agreement?
LP in Brighton wrote:
What if it's a payment for a saloon? A saloon balloon, if you will.
Fun to say, not fun to pay.
Ridiculous car price inflation
Hiding recent huge car price inflation behind the monthly payments of finance deals has suddenly got a bit complicated for people using these schemes (these people being instrumental in allowing the manufacturers to get away with massive price hikes as some people now accept them as the 'norm' and only consider monthly payments rather than the huge cash price).
I find it hard to find sympathy for anyone taking out a finance deal for the above reason, and on cars they can't really afford, or at least consider some contingency into their financial planning to cater for a rainy day; especially those financing 'prestige' models to make themselves look good when a nearly new, much cheaper, depreciated model from a more mainstream manufacturer would perfectly suit their needs and their bank balance.
In most cases, people can
In most cases, people can afford the cars that they're leasing through PCP agreements. If you can afford the payments then you can afford the car... I agree that most people should have a contingency plan in case income suddenly suffers, but these are most certainly unprecedented times and a highly unusual situation.
It's not so much that people can't afford repayments, it's the option at the end. Some people's leases will be ending and they can't replace their car because showrooms are shut, and they can't finance the baloon payment because lenders are tightening their belts and not lending as much.
For a small number of people it will be a very tricky situation indeed.
I'm personally sad because I had my new car delivered in the first week of March and I've only done 175 miles in it :( Still, I'll be well below my mileage expectation agreed with the finance company!
You've succumed to the brainwashing.
I agree with everything else you say but you appear to have fallen in to the salesman or should I say, this generation's trap of thinkng you can afford the car.
When you take out your PCP, you're the registered keeper of the car but you don't own it. What you should have said is that you can afford the repayments for the temporary use of someone elses car, but until you've made the final baloon payment, the car is not yours.
If you could afford the car then why take out finance? Finance companies need to make a profit to survive, they are not a charity shop, they make profit by lending you money because you can't afford to buy the product.
scotty5 wrote:
Car prices
The Pound dropped in value by about 25% about 4 years ago. we all kow why, over this time list prices have been gradually moved to be in line with other countries and used car prices have adjusted in line, there have been some marketing ploys to maintain sales and PPI compensation must have helped a bit.
It is impossible to ignore that car prices make a new or used purchase less affordable, ignoring interest rates than they have been in decades. If you add in the lower enthusiasm for cars and driving amongst younger people and the changes that are likely during and post covid-19 (People are already sharing with me surprise at how efficient it is to network rather than sit in a jam). Car sales both new and used look to take a tumble.
Having said all that, I'm really naffed off that my new C5 aircross is stuck in limbo.
@gavsmit