ZOPA has found that a staggering nine out of 10 people are unable to identify the cheapest car finance deal, in the wake of the City regulator’s review into the market.
The peer-to-peer consumer lender, which is looking to expand its car finance offering, commissioned a survey of 2,000 UK adults to pick out the cheapest deal from five common car finance options.
The study included a range of common car finance options such as hire purchase loans, PCP (Personal Contract Purchase) deals, and personal loans, with different rates, different deposit amounts, and time periods (see infographic below).
The vast majority – nine in 10 – were unable to pick out the lowest-cost option.
Meanwhile, a separate survey commissioned by Zopa found that 47 per cent of 1,000 people who had recently bought a car with finance could not identify what type of car finance deal they actually signed up for.
The survey also found that two in three people (69 per cent) taking out car finance in the last five years had no idea whether they received a hard credit check when they first inquired about a car. Many dealerships still leave unnecessary hard marks on a car buyer’s credit file before they’ve received a personalised quote, which will impact their credit score and potentially hinder them from obtaining credit elsewhere.
The research follows the Financial Conduct Authority’s recent review into the car finance sector. The City watchdog found that people using finance to buy a car may have been overcharged on their interest payments by £1,000 or more because of the way lenders pay commissions to motor dealers, with the regulator set to investigate how commission works in the industry.
“Buying a car is a major financial decision, yet it’s so complex it’s nearly impossible for people to work out the best finance option,” said Didier Baclin, Zopa’s chief product officer.
“In the wake of the FCA’s report into the car finance market, Zopa wants to provide a better alternative for people looking to buy a car, doing away with the complex finance deals and baffling jargon. Our aim is to help create a fairer and more transparent car market so that people can take out car finance knowing what they’re signing up for and whether its right for them.”
Zopa offers hire purchase car finance directly to customers via its website, price comparison sites, select brokers and reputable dealers.
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