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Car customers overcharged hundreds of thousands on PCP finance

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Car customers overcharged hundreds of thousands on PCP finance
Young couple buys a car

The Financial Conduct Authority (FCA) says the industry exercise of car sellers placing their interest rates costs clients around £300m a yr, the BBC reviews. Dealers overcharge to increase their commission, the FCA concluded.

According to the broadcaster, four-fifths of new motors are bought using Personal Contract Purchase (PCP) offers, in which customers “lease” an automobile from a supplier over the direction of 3 to four years.

Once the length is over, clients are given a choice to either pay the automobile’s extra fee for permanent ownership, use the closing value to take out a brand new PCP deal or hand the motor back.

However, the FCA claims car sellers are setting better hobby rates on PCP offers than if customers were to take out a bank mortgage, MoneySavingExpert reports.

The watchdog also states that dealers have been no longer offering clients with “clean and comprehensible” facts about PCP deals, meaning customers “won’t be able to make knowledgeable choices,” provides the consumer internet site.

Jonathan Davidson, the FCA’s director of supervision, called the practice “unacceptable” and vowed to “cope with damage resulting from this enterprise version,” The Independent reviews.

“We also have issues that companies may be failing to satisfy their present obligations in terms of pre-settlement disclosure and motives, and affordability checks,” he introduced. “This is sincerely now not good enough, and we expect companies to review their operations to cope with our issues.”

The take a look at has been criticized by way of the Finance and Leasing Association, which accuses the FCA of basing its research “largely on out-of-date statistics.”

The frame argues that the FCA’s studies “does now not replicate the huge development the marketplace has already made in moving far away from such systems.”

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