Finance expert Martin Lewis has warned that almost 40 per cent of new car repayments schemes could be overcharging consumers to hit hidden commission goals with the public owed back as much as £234million.
The dodgy car finance dealings added hidden charges to consumers which resulted in overpayment of £1,100 which is likely to be paid back once the regulator, the Financial Conduct Authority (FCA), reports on its findings in September.
The regulator has started to crack down on the discretionary commission arrangements which meant lenders offered extra cash to brokers and car dealers if they made up higher interest rates on car loan payments.
Lewis, who recently launched a tool for the public to see if they have been overcharged, said its already received over 530,000 complaint emails in the one week the resource has been live.
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An estimated 40 per cent of finance agreements had dodgy commission arrangements
PA
The money saving expert said: “The regulator estimates 40 per cent of finance agreements had these dodgy commission arrangements (you won't know if you did as it was hidden).”
In December, consumer monthly car payments on new vehicles fell eight per cent as more people looked to get their finances in order for the new year.
The drop in new car business which is valued at almost £39billion has been steadily falling with volumes decreasing by five per cent in 2023 and six percent in 2022.
New figures by the Finance and Leasing Association (FLA) saw new business in December drop 12 per cent in value and 13 per cent in volume compared with the same month in 2022.
In 2023 as a whole, new business volumes in the motor market were six per cent lower than the previous year.
As for the used car repayment market, the data reported a fall in new business in December of five per cent both by value and volume compared with the same month in 2022.
Geraldine Kilkelly, director of research and chief economist at the FLA, said: “The consumer car finance market reported a modest fall in both the value and volume of new business in 2023.
“The value of new business in this market at almost £39billion was the second highest on record.
“Consumer confidence has begun to increase as the outlook for their personal finances has improved.”
Last year as a whole saw new business volumes in this market fall six per cent compared to 2022, the association found.
In November, the new consumer car repayment market fell by four per cent in value compared to the same month in 2022.
Kilkelly added: “Nevertheless, consumer spending is expected to remain subdued this year and our latest forecasts suggest that the point of sale consumer car finance market is likely to see new business grow by around 2 per cent in 2024.
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New car business volumes fall by six per cent
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“As always customers who are worried about meeting payments should speak to their lender as soon as possible to find a solution.”
