Deal complaints are on the rise due to rising interest rates and cost of living.
Complaints about auto finance deals have doubled in the past year due to drivers having difficulty paying their monthly bills.
Abby Thomas, the chief ombudsman for financial disputes, said that she was “increasingly receiving complaints from people who are worried about their ability to pay finance deals”. Data revealed an increase in complaints by drivers. There were also allegations of irresponsible loaning.
In the second quarter of 2018, the Ombudsman received 4,622 complaints regarding hire purchase agreements, which is more than twice the number of complaints received the year before and the highest ever number since 2019.
Car finance and insurance are now the second most complained about topics after bank accounts. They make up a quarter (up from 18pc) of all complaints.
Ms. Thomas expressed concern about the increasing number of complaints related to vehicle use, and how it affects those who heavily depend on their vehicles.
In 2009, less that half of private car buyers used dealer financing. In 2018, the figure was over 90pc. However, it has decreased in recent years to 78pc.
Stuart Masson is the editorial director at The Car Expert. He said that rising school fees, higher mortgages, and a cost of living increase meant families are “running out of money each month”.
Recent interest rate increases by the Bank of England have caused mortgage borrowers with variable rates to see a rise in their monthly payments.
Catherine McBride is an economist at the Centre for Brexit Policy. Many people bought houses with temporary fixed rates in the hope that rising interest rates wouldn’t affect them.
She said that many people took out mortgages without realizing that the interest rates would increase.
The high interest rates could make it harder for people to pay for their cars in the long term, as many households are using their disposable income to cover the increasing costs.
The cost of car insurance is also at an unprecedented high. Electric car insurance costs have increased by 41% in the past year. Experts say that insuring electric cars is challenging due to the struggle in accurately determining the cost of battery repairs.
Drivers are increasingly turning to debt advice charities for help. StepChange has seen a rise of almost a fifth among people with car loans who have approached them in the last year.
The Ombudsman found that lenders gave thousands of pounds to people for car purchases without checking their ability to repay the money.
In June, the court decided that a lender had given a borrower about £10400 through a hire-purchase agreement, even though the borrower often used payday loans and spent a lot of money on gambling.t a lot of money on gambling.
Another firm was rejected for a loan of £26,000.00 in the same month. The loan was approved for a struggling borrower who wanted to buy a car by mid-2020.This was despite his high short-term debt and “deteriorating finances”.