11:41 am, November 27, 2019
MILLIONS more people have started using car finance, but many are completely baffled by it, according to new research.
Figures from the Finance and Leasing Association (FLA) show the value of the UK car finance market reached almost £4.3 billion in September, with more than a quarter of a million cars funded during the month.
But research from Hippo Motor Finance shows many people are confused by the jargon that comes with this type of finance and don’t necessarily understand the options.
Peer-to-peer lending company Zopa reported last month that nearly half of consumers who purchased a car with finance didn’t know what type of deal they had signed up to.
A key reason was because of the jargon, with 19 per cent saying they didn’t understand it and 16 per cent saying they didn’t follow the finance options given to them.
Admiral also reported last year that just one in 10 British people understands car finance jargon, with some believing certain relevant abbreviations have nothing to do with car finance at all.
Many people said they thought PCH was either a hallucinogenic drug or stood for personal car hire, for instance, while others presumed the term ‘balloon payment’ was made up!
Among the terms car buyers find confusing are APR (annual percentage rate), GFV (guaranteed future value), and VT (voluntary termination).
Tom Preston, managing director of Hippo Motor Finance, said: ‘There is a lot of jargon out there. It’s like learning a new language for some people, especially those new to car finance.
‘It’s important for people not to be afraid to ask questions about the terms they come across if they’re not clear about them.
‘They need to make sure they fully understand any agreement they sign up to, know exactly how it works, what it involves, and if it’s right for them.’
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