Put your pitchforks away - not me.
After the entirely reasonable IMHO ruling last week, that of course car finance sellers are not entirely liable for putting the client's interests before their own and they do have a stake in the game of getting a car sold and deal done, it only leaves valid cases where (very broad summary) the commissions are totally out of line with the value of the package and the consumer hasn't been made aware (or potentially is felt to not have sufficient knowledge to realise). In cases where people were blatantly taken advantage of, I'm quite sanguine about the finance co getting nobbled for it.
But the moral dilemma.
In releasing the banks and finance co from the potential of massive payouts their shares and I assume bonuses are going great guns again.
On the other hand - the gutter crawling law firms that sprung up on the back of 'had car finance - you're due a payout!' have now seen a large proportion of their claims kicked out and the ones that remain they might have to actually work quite hard to prove that the client was missold, and their 30% is going to have to actually pay for some work.
I'm not sure which of my tiny violins I was looking forward to playing more. Dodgy finance sellers, or ambulance chasers? Couldn't we have found a compromise where both get stuffed?
Well yeah it's called being on the side of the consumer when they're exploited.
Reeves' activity here was utterly pathetic.
There isn't a moral dilemma. In fact the main issue was for me more to do with Reeves' who's only concern was a big outflow of money from the PS rather than anything else.
That's an elected public servant not acting as per usual in the public's interest.
The slight problem is that without a car finance industry, there isn't a car industry.
The other problem is that both the finance industry and the car industry have more than enough money and clout to influence Governments.
The world is unfortunately built on exploitation.
Some people get a better deal than others.
Buying luxury items with borrowed money increases the chances of being exploited by others.
Is there a better way or a lesson to be learnt? Probably.
Buying luxury items with borrowed money increases the chances of being exploited by others.
This. Theres another side to this, as someone who's never had a car on lease or finance. I've very small violins for people who bought cars they couldn't really afford on finance and paid a high rate for it (they knew what the costs of the deal were and decided they'd got value out of it, even if they didn't know where all their money was going).
They were happy with the price at the time - why should they be compensated now? If they are it will hit the share price/profits/dividends of companies that nearly all of probably hold investments in through our pensions or with higher finance costs in future. It's not the car dealers who got the bonuses who'll be paying.
As above. Told how much the cost of a new car was. Decided it was ok.
As above. Told how much the cost of a new car was. Decided it was ok.
Which is all fine - but no one is immune to having some involvement with financial institutions.
If they aren't held to account it can affect everyone, no matter the product you are buying from them. Be that pensions, insurance, finance, your savings or current account etc. They could rip consumers off on any of those if they're allowed free rein.
I've very small violins for people who bought cars they couldn't really afford on finance and paid a high rate for it (they knew what the costs of the deal were and decided they'd got value out of it, even if they didn't know where all their money was going).
Trouble is there's consumer protection laws that are supposed to be protecting everyone from getting ripped off - including those of lower understanding. There's a fine line between what you say and taking advantage of people who are still entitled to spend money and have cars but lack the understanding to know if they're paying above the odds.
It's an similarly fine line then to people getting scammed out of savings buying eg: home improvements that will never make the energy savings that are claimed. Is 'well they should be smarter' a fair response to that?
Anyway, intended this to be slightly light hearted / a dig at the law firms that thought they'd get 30% of claims for basically doing FA, and now finding their volume is down substantially and what they do have they'll have to work for!
Also obvs delighted that once again the immediate response is another blame the Government comment. FFS.
No moral dilemma. 30% of billions of quid will not be going to ambulance chasing lawyers. A great result. Last time I bought a car on finance I shopped around and got an idea of what APR I could get elsewhere before even speaking to a car salesman. It isn't rocket science.
Anyone who thought a car salesman was their friend maybe shouldn't be signing contracts.
A similar story with mobile homes sales. Back when we used to take the kids for holidays to a mobile home there was always vastly expensive caravans for sale by the park owners. with guff about ownership savings etc. 2 minutes investigation and it was clear that £60k for a caravan that was scrap in 15 years plus £6k a year sites fees while under a one sided contract to the site did not equal cheap holidays.
If I had £10k a year for holidays (which we didn't) we could have several holidays in various places for less.
More people who don't realise new expensive shiny things with a limited market for resale lose money fast.
Last time I bought a car on finance I shopped around and got an idea of what APR I could get elsewhere before even speaking to a car salesman. It isn't rocket science.
Anyone who thought a car salesman was their friend maybe shouldn't be signing contracts.
Well aren't you very clever - unfortunately many people aren't and need protecting.
Theres another side to this, as someone who's never had a car on lease or finance. I've very small violins for people who bought cars they couldn't really afford on finance and paid a high rate for it (they knew what the costs of the deal were and decided they'd got value out of it, even if they didn't know where all their money was going).
They were happy with the price at the time - why should they be compensated now? If they are it will hit the share price/profits/dividends of companies that nearly all of probably hold investments in through our pensions or with higher finance costs in future. It's not the car dealers who got the bonuses who'll be paying.
100% this. Whenever I make a purchase I assess whether I'm happy with the cost to me, I don't concern myself with what margins everyone else is making.
If you were happy to pay out 500 quid a month at the time for a vanity purchase then that's your decision and you shoukd live with it. Other options would have been available.
Is it really any different than me demanding a refund when I find out that the sales rep at my local bike shop got a commission on my 5 grand bike..
wander how far this will go - mortgage mis selling next?
Buying luxury items with borrowed money increases the chances of being exploited by others.
If I remember correctly one of the people that this all kicked off from couldn't be described as buying a luxury item*, more buying something he needed to get to work as a result of dire public transport system in most of this country.
* Cheap secondhand Corsa I think
"Well aren't you very clever - unfortunately many people aren't and need protecting."
Maybe the courts should help put people who buy an expensive bike and miss the fact it was on sale somewhere else as well. Protect the people!
There is nothing smart about checking you are getting a fair price/APR just common sense.
Yes, 55% of the cost of finance went on the commission payment. And the court ruled (paraphrase) that he was taken advantage of because of low understanding of what the deal was.
So those that say it's up to the buyer to be more savvy are by the same words saying it's ok for the knowledgeable to take advantage of them?
Which is now what the lawyers are going to have to show - that the fees/commissions were inflated and that the person didn't understand that they were being taken advantage of. Seems a fair balance to me.
Which is now what the lawyers are going to have to show - that the fees/commissions were inflated and that the person didn't understand that they were being taken advantage of. Seems a fair balance to me.
Which seems like the right decision. What wouldn't have been is blanket compensation for people who were happy with the deal they got at the time and smart enough to understand it.
It's always felt to me like the PPI 'scandal' went the wrong way (though it didnt' affect me and I've not studied it) but a few perfectly intelligent friends took loans, were completely happy with them, then got a chunk of money back.
(and yes, I accept there are 'evil patterns' that should be regulated against - I've just paid an extra £2 for 'worry free shipping' that I though was the whole charge but was actually unnecessary insurance/prepaid return. And the automatically ticked 'insurance' on flights/concert tickets that you have to repeatedly uncheck every time you buy something nowadays). But I dont' expect to get the money back in 10 years time.
There is nothing smart about checking you are getting a fair price/APR just common sense.
There is if you don't even understand what APR is. And don't say well they should, because you know that many people will never understand it. There's a world of difference between running a household budget and the world of financial products.
And in the real world of shit jobs and average salaries a lot of people sit in front of the car salesman and are over the moon they've been approved for finance in the first place.
They know what monthly figure they can afford but is it right that a car salesman shows them a figure of £200/month and sells it as a great deal when they are hiding the fact that it could be offered at £175/month.
It's pretty remarkable people are defending those honest upstanding bankers and car salesmen! 🤣
I wonder how many folks who are now eagerly hoping for a payout would genuinely not have gone ahead with the purchase if there had been full transparency on the fees.
I suspect it would be a very small minority.
I don't concern myself with what margins everyone else is making
And if the margin were excessive, undisclosed, and an inducement to the seller to provide you a disadvantageous finance deal you’d still be fine?
The setup reminds me of a retail job back in the 20th. Each person you got to sign up to a store credit card got you a £30 bonus. Pretty shocking.
I wonder how many folks who are now eagerly hoping for a payout would genuinely not have gone ahead with the purchase if there had been full transparency on the fees.
I suspect it would be a very small minority.
I mean it's pretty clear that the whole car finance/lease system is built on sand with people buying stuff they can't really afford. As far as I can tell it mainly seems to be stopping the legacy car companies from going bust from not selling the oversupply of cars they build every year. But these companies are in the 'too large to fail' category so governments prop up and turn a blind eye.
I think the case has highlighted the lack of financial education/understanding that people have, so they may not understand the questions to ask or understand the answers
And if the margin were excessive, undisclosed, and an inducement to the seller to provide you a disadvantageous finance deal you’d still be fine?
Honestly yes. I have always bought my cars with cash (sometimes via a bank loan), but my latest one is on PCP. I pay around 500 a month, which when I took it out was the amount I was willing to pay.
How does the breakdown of that 500 affect me in any way? It's a second hand car, for all I know the dealer acquired it at 50% what I paid and is making a huge profit. I still end up getting exactly what i paid for, at a price that I readily agreed to at the time.
They know what monthly figure they can afford but is it right that a car salesman shows them a figure of £200/month and sells it as a great deal when they are hiding the fact that it could be offered at £175/month.
But used car prices are completely elastic. If people can afford £200/mo then they'll be charged £200/mo. If the amount of commission were less, the price of the car would be more. It would affect who gets the money, but not how much the buyer pays.
But used car prices are completely elastic. If people can afford £200/mo then they'll be charged £200/mo. If the amount of commission were less, the price of the car would be more. It would affect who gets the money, but not how much the buyer pays.
Absolutely...pretty much no different than any other purchase folks make, especially 'lifestyle items'.
There's a case to be made for greater transparency in such transactions. For instance, a (very) simple table showing how much of any repayment is going to pay off the capital, how much is interest and how much is dealer commission. I know that will still be too complicated for some folk but it would inform some of the less wordly-wise.
I'm not sure which of my tiny violins I was looking forward to playing more. Dodgy finance sellers, or ambulance chasers? Couldn't we have found a compromise where both get stuffed?
I haven't followed the exact details but isn't that actually what the ruling seems to achieve? (1) Finance houses who clearly turned a blind eye to customer's being exploited get a kick in the nuts, albeit not actual full-on castration that some people would like; (2) Bandwagon claims companies got the rug pulled from under them.
30% of billions of quid will not be going to ambulance chasing lawyers. A great result.I'm not sure many of the ambulance chasing claim farms have big teams of lawyers - its 90% admin work you don't need a legal degree to populate templates. However there is a form of legal case finance which is essentially funded by private equity style money - and not lining their pockets is good, but means the next scandal (which might be one you feel more moral sympathy with, like the Postmasters) will find it harder to get backing and the golliath with be able to strong arm their way to a win.
Reeves' activity here was utterly pathetic. There isn't a moral dilemma. In fact the main issue was for me more to do with Reeves' who's only concern was a big outflow of money from the PS rather than anything else. That's an elected public servant not acting as per usual in the public's interest.
You think that a government minister has clout over the judges?
Is it really any different than me demanding a refund when I find out that the sales rep at my local bike shop got a commission on my 5 grand bike..
What if sales guy gets 5% commission on bike sales but 20% commission on any finance he can get you to buy above the rate which the finance house would offer you anyway? Are you now buying a bike where the shop offers a convenient finance package to help them sell you bikes or are you buying a finance package which bikes are a convenient cost to attach to? What if the bike shop has trained its staff to focus on the monthly payment not the total cost (or that you may not own it at all) or the interest rates. Will that make the sales assistant likely to missell to you?
Are you now buying a bike where the shop offers a convenient finance package to help them sell you bikes or are you buying a finance package which bikes are a convenient cost to attach to?
I'm still very much buying a bike.
You may not agree, but as I've said its totally irrelevant to me how the money is split up after it leaves my pocket. As another poster pointed out, if I didn't have to pay the commission I wouldn't get the product for any less, someone else would just take a bigger slice of the pie
100% this. Whenever I make a purchase I assess whether I'm happy with the cost to me
Are you still happy when hidden within the cost to you, is a payment to someone else, that you are making, that isn't made clear to you at the time of making that decision?
The recent ruling isn't about protecting people who don't read the fine print, it's about making sure the fine print contains the relevant facts. There were two rulings, one that says its fine for dealers and finance companies to preference themselves over consumers, the second said it's not OK not to tell people that the extra interest rate they're paying (in one case as much as 55% of the payments) is going as commission to the dealer, while pretending that they're disinterested in the choice of finance company.
Honesty and fairness, if you want.
Absolutely...pretty much no different than any other purchase folks make, especially 'lifestyle items'.
But most importantly houses, which is a bit of a problem.
Also tied up in all of this is something called "discretionary commission arrangements" which was made illegal after Jan 2021 which stops dealers from artificially increasing interest rate to consumers for the purpose of bumping up their commissions - without telling consumers that's what they're paying for.
Again; honesty and fairness.
It's all very well blaming consumers for their poor choices from your high horse, as long as you're certain those consumers had all the information to hand when they made their decision.
Are you still happy when hidden within the cost to you, is a payment to someone else, that you are making, that isn't made clear to you at the time of making that decision?
I honestly can't see how it makes a difference. If I buy a bike cash, how do I know where all the money is going? How much is going to the unscrupulous landlord who over-charges the company that makes fork bushings in China?
The car dealer needs a certain income to be profitable. If they weren't getting commission, they'd be getting the money from the list price. That's why you sometimes get a discount if you take the finance. I suppose the real winners here are car companies who benefit from being able to set new prices that benefit from inflated used prices. If cars came out cheaper, then people would just buy slightly newer ones.
I honestly can't see how it makes a difference.
The ruling specifically says that it's OK to make money from consumers who want to finance their cars rather than pay outright, as long as everyone's clear about what's happening. While ultimately you may think "Mleh, who cares", it's better [generally speaking] that you have that information that not.
But it's not about the amount of commission - everyone knows people need to get paid and businesses have to make profits.
It's the DCA agreements that were the problem and enabled the car salesmen to sit in front someone, think "these are a soft touch", and add another few percent to fund their own lifestyle purchases.
This is a good listen to understand what sort of sharp practices were being employed, and how:
File on 4 Investigates - Car finance - BBC Sounds
I'm not sure which of my tiny violins I was looking forward to playing more. Dodgy finance sellers, or ambulance chasers? Couldn't we have found a compromise where both get stuffed?
You don't really need to take vicarious pleasure in the situation at all, just support a fair outcome where people who were obviously ripped off get appropriate redress.
I don't yet understand what's actually going to happen, but it'd be nice if finance firms were told to just pay back a certain amount of the % they charged, if a much lower rate was available to that customer at the time - without the need for solicitors to take a cut.
but it'd be nice if finance firms were told to just pay back a certain amount of the % they charged, if a much lower rate was available to that customer at the time - without the need for solicitors to take a cut.
Well however they do it there is no need to get a solicitor involved. Take PPI for example. There was absolutely zero reason to go via a solicitor to claim money back, other than through sheer laziness
I had no idea I'd taken out PPI, and still can't remember having ever done so. Yet I sent a speculative letter to my bank asking if I had, and they sent me 2 grand 6 months later.
Solicitors will add absolutely zero value to the process if you think you have a claim
Also obvs delighted that once again the immediate response is another blame the Government comment. FFS.
More a blame the chancellor for her unwarranted intrusion into the workings of law in an attempt to influence the judgement. (One can remind a jury that they don't have to convict in the teeth of the evidence, but trying to influence judges ruling on a point of law steers very close to perverting the course of justice).
More a blame the chancellor for her unwarranted intrusion into the workings of law in an attempt to influence the judgement. (One can remind a jury that they don't have to convict in the teeth of the evidence, but trying to influence judges ruling on a point of law steers very close to perverting the course of justice).
I sort of see where you are going with that.
But then the government makes those laws. They could in principle re-write them. So it would seem entirely appropriate that members of the government tell people what they think about present or future laws otherwise we'd be voting blind. There are plenty of legal financial scams that need solving, like leaseholds. If we adopt a stance that politicians cant have opinions on existing laws then who can?
I don't disagree with the way the judgement went, people got cars that they wanted, at prices they could afford. And economically it was probably a coin toss between the top down argument that finance companies keeping the money allows them to continue lending, which drives growth. Vs the bottom down argument that redistributing the money increases spending which drives growth.
More a blame the chancellor for her unwarranted intrusion into the workings of law in an attempt to influence the judgement.
Reeves pointed out that had both decisions gone in favour of consumers many of the finance companies and banks would've probably been bankrupted, so would not have 1. paid back any money to consumers, 2. be able to offer finance in the future. 3, which may have unforeseen impact on the UK car market given that 80% of people buy their cars on finance and is worth £17 billions a year- including dealers, manufacturers, and all the associates trades, and 4. the same for the finance industries and all the people employed by them, and probably fearing that the whole mess would be left at the feet of government to pick up the tab.
She then said (probably correctly) that compensation should be "proportionate to the harm". As @molgrips suggests "I can't see how it makes a difference" If you're making the payments on your car each month, and then some-one then tells you, "hey did you know that £20.00 of that goes to the dealer?" It's going to be more reasonable that you get your £20.00 back rather than 'damages, or injury' along with it, and in the future, consumers are given the facts ahead of time.
This way, ambulance chasing solicitors aren't going to get a pay day for doing squat all, and the compensation scheme will be affordable, and probably automatic.
I had no idea I'd taken out PPI, and still can't remember having ever done so.
PPI was way worse then this though. I briefly worked in a bank branch in the middle of the selling of it, one of the more senior advisors showed me a stack of account opening paperwork - a couple of forms for the account opening and a 3rd at the back for PPI. So they just said to the customer we need 3 signatures, it was outright fraudulent. And many of the products you literally couldn't claim against either.
For this car finance you are still getting a car for £x/month.
Agreed about ppi. That really did screw the consumer over and was pretty much robbery. I don't equate this to that at all. The consumer is still getting the product they bought at the price they agreed
My point was that when it came to ppi claims, once told they had to pay up, the banks did without much quibble. There was no need to engage a lawyer to get your money back, and I strongly suspect this situation will be the same
Last time I bought a car on finance I shopped around and got an idea of what APR I could get elsewhere before even speaking to a car salesman. It isn't rocket science.
When I bought my van, the very young salesman asked me if I wanted finance. I answered, "Liam, I'm a middle aged bloke and my bank offered me 4.5%"
"Well you definitely don't want ours then!" was the reply.
I think the next mis-selling scandal will be the mis-selling mis-selling claims, where everyone claims the extortionate 30% commission back from their solicitors.
Double post
I think the next mis-selling scandal will be the mis-selling mis-selling claims, where everyone claims the extortionate 30% commission back from their solicitors.
It's actually not as ridiculous as it sounds. These companies are insinuating you need their assistance to get your money back, when in reality that's a blatant lie and they are getting thousands of your pounds for filling out a form you could easily do yourself
Of course buried somewhere in the small print is the fact that you don't actually need their assistance at all. But who reads the small print. One of these firms needs to go rogue and turn on the others..
Oh how I would chuckle.
Last time I bought a car on finance I shopped around and got an idea of what APR I could get elsewhere before even speaking to a car salesman. It isn't rocket science.
The majority of adults in the UK are at the expected literacy of an 11-14 year old, and numeracy of a 9 year old.
Shopping around for APRs and understanding contract documents might as well be rocket science for many.
Are you now buying a bike where the shop offers a convenient finance package to help them sell you bikes or are you buying a finance package which bikes are a convenient cost to attach to?
I'm still very much buying a bike.
You may not agree, but as I've said its totally irrelevant to me how the money is split up after it leaves my pocket. As another poster pointed out, if I didn't have to pay the commission I wouldn't get the product for any less, someone else would just take a bigger slice of the pie
ok would you like to buy the bike for £5k cash right now? Or you can take out our finance package - it’s just £99 deposit today and then £99 a month for 5 years. After which you have the option to pay us a final payment of £1500 and own the bike, or trade the bike in and if it’s worth more than £1500 we will give you the difference.
The fact that you could realistically get a standard loan at 11% APR (not cheap) for £107/month - but no final payment, means you would be better not taking the shop deal.
We “all” know that sales staff may be commissioned on the bike (or car) but if what if the shop assistant is free to increase the interest rate by as much as they want, and they get an incentive for doing so. There is an argument that says if you sign the contract tough luck, but the court seems to have concluded that if people are not clear who they are negotiating with then they might be misled on their options.
