Car finance "compensation", reasonable or unreasonable ?

[Justin Smith]

Why are up to 23 million people apparently entitled to compensation (which we will all end up paying one way or another...) over the finance they took out to buy their vehicles ?
As I understand it, there were commissions paid by the lenders to the companies selling the cars, but :

1 - I don't ever buy stuff on credit (that's why my car is 12 years old...) but if I did buy a car on finance I would assume the seller was getting a commission from the finance company !

2 - But whether they were aware of any commission or not is surely irrelevant anyway ? The buyer is told what their repayments will be and they either think that's acceptable (and then buy the car) or they think it is too expensive (and don't buy the car). Is it just me but I cannot see how it matters who is making what money from the deal if the customer was happy to sign up for it at the quoted price in the first place.

 

[thetiger2015]

I believe it's because they weren't clear about which part was commission and which part was finance, also potentially inflating the monthly repayments to give themselves a bigger commission, rather than stating 'We pay ourselves a 10% commission', it was just random I think.

For example, they could have said 'Vehicle Price £20,000, Commission Price £2,500' Total finance - £22,500 including commission but they didn't, they just factored in the commission with the monthly payment, leaving it open to be inflated at the time of sale. Even adding just £10 per month on for themselves, across 60 months, is an extra £600 for them which wasn't the original price of the vehicle.

 

[Justin Smith]

I believe it's because they weren't clear about which part was commission and which part was finance, also potentially inflating the monthly repayments to give themselves a bigger commission, rather than stating 'We pay ourselves a 10% commission', it was just random I think.

For example, they could have said 'Vehicle Price £20,000, Commission Price £2,500' Total finance - £22,500 including commission but they didn't, they just factored in the commission with the monthly payment, leaving it open to be inflated at the time of sale. Even adding just £10 per month on for themselves, across 60 months, is an extra £600 for them which wasn't the original price of the vehicle.

But the point is, was the monthly payment what they'd originally been quoted?
If so I cannot see why they are entitled to any "compensation" at all. Are all sellers to tell buyers exactly what their profit margin is and who is getting how much of the purchase price ? It's nothing to do with them !

 

[thetiger2015]

But the point is, was the monthly payment what they'd originally been quoted?
If so I cannot see why they are entitled to any "compensation" at all. Are all sellers to tell buyers exactly what their profit margin is and who is getting how much of the purchase price ? It's nothing to do with them !

I think there's a few strands to it, relating to honesty around selling financial products, offering terms that were higher cost to make more profit when customers should have been offered a better option for their affordability and controlling the interest rate of the offer. Some dealerships, who offered their own finance, could bundle things together and the interest on top would boost their overall commission profit. So, they were offering a financial product without fully disclosing that the customers monthly cost would be higher with all the options and higher interest rate added on.

They've actually banned the option to adjust interest rates now.

it's not about saying oh, can you afford £300 per month for this car? It's more, let's run through everything with you and tell you that we do take a commission from any finance but here's some options for you and here's our commission rate for selling you this product. People would maybe have chosen to get their own finance elsewhere but didn't have the option because they weren't told about the commission on top. For example.

 

[Mark T Jones]

As someone who provides finance in a B2B environment, the idea of telling a customer that I earn commission is comical or even offensive.

That said, motor dealers did deliberately let their customers believe that finance was a 'free service' to help them buy (lying by omission) - and some did take the piss on discretionary commissions

Those issues were addressed by the FCA .
Then the ambulance chasers got involved. Ambulance chasers dont chase ambulances, they park an ambulance and set up the accident.

In this case, they launched multiple test cases, specifically designed to implicate the banks as accessories. Finally they got one to stick.

Why banks? Because they are a soft touch for compo. Motor dealers will duck, dive and fight each individual case, banks will fight the principle through the courts, but will cough up if they lose.

Though it has been stressed that there is no need to use ambulance chasers, once the review is complete the banks will have a streamlined system for paying out

 

[MikeJ]

I think the main winners out of this are the advertisers. I can't move for seeing an advert for this stuff.

 

[Justin Smith]

People would maybe have chosen to get their own finance elsewhere but didn't have the option because they weren't told about the commission on top. For example.

But they would have had the option to get their own quote, why would they not have ?
Doing so would be the first thing anyone with half a brain would do ! So we appear to be saying the seller should, by law, be advising the customer to also get his or her own quote, where is personal responsibility in all of this ?

 

[fisicx]

The appeal has failed. You are very unlikely to get any compensation.

Lenders won't have to pay compensation to millions of motorists over car finance loans, court rules - live updates

Lenders avoid potentially having to pay compensation to millions of drivers after the court rules they're not liable for hidden commission payments in car finance schemes.

www.bbc.co.uk