There is an increasing trend for adverts from car finance firms that specialise in offering easy finance for those with bad credit histories to vulnerable consumers on Facebook.
One advert’s headline stated ‘no judgement – all credit histories welcome’ with ticks against the following captions;
- Get approved in just 62 seconds
- Borrow from £2,000 – £50,000
- Absolutely ZERO broker fees
- Rates from 9.9%.
- Representative 22.4% APR.
- Apply Online Now
They even had to ask a customer afterwards if she was happy to have her photo taken against a prestige vehicle that she clearly couldn’t afford. I say that because she didn’t look like the type of customer who could afford to buy it and if she was, she wouldn’t be using this finance facility to do so.
That leads me on to the crux of what I want to focus on here.
The 7 year old vehicle (a Range Rover) featured in this advert at a guess would cost £20,000 and if that was borrowed over 5 years at 22.4% the total cost would be about £32,000. The vehicle would be worth a fraction of that by the time the finance was paid leaving the customer (who could not afford the car in the first place) tens of thousands of pounds in further debt.
Whilst there is clearly a need for firms to offer credit facilities to those that cannot access conventional mainstream credit, this is clearly aimed at exploiting those who can least afford it.
Furthermore, the ethics and morals of firms that play to this audience are clearly questionable. I would like to see the Financial Conduct Authority shine a spotlight on these practices given the credit bubble that has been fuelled by Personal Contract Plans (‘PCPs’) over the past few years.
One thing I correctly predicted would happen about ‘rent to buy firms’ being regulated in a similar way to pay-day firms by the Financial Conduct Authority in December 2016.
I also wrote about PCPs set to be the new PPI in May 2017.
What are your thoughts on this? Do you see this as a rip-off or an essential life-line for consumers with bad credit that need car finance?