Car-buying plans probed over fears of massive debt
plans. The watchdog told the Irish Daily Mail that so far this year it has received 100 complaints over the plans. Motorists say they are left with a huge bill – usually for several thousand euro – at the end of the contract that usually lasts three years.
And many didn’t realise they would face a financial penalty for excessive mileage.
Under a personal contract plan, car buyers pay a set amount each month, but will only own the car if they make the final ‘balloon’ payment.
Of further concern is the fact that people in financial difficulty cannot sell the car without the prior agreement of the lender.
Alarmingly, because they are considered as hire purchase agreement they are not regulated by the Central Bank, even though the Dáil heard recently that many car sales in Ireland are based on these contracts.
It is now expected that second-hand car prices will
A penalty for excessive mileage
slump here, when thousands of PCP drivers are not able to make the final payment, and will instead hand the keys back to the dealer.
Fianna Fáil’s Thomas Byre has recently told the Dáil: ‘There was a surge in car sales in 2014. Many of those who bought cars in 2014 are coming to the end of their PCPs and, as per the contract, are now being forced to make a bubble payment.
‘What is the answer for those who may not be able to make the bubble payments that are now arising or will arise next year or the following year?’
He also said: ‘The truth is that second-hand car prices are collapsing because of the large numbers of cars being imported from the UK.’
The Society of Irish Motor Industry is concerned about the impact PCPs will have on car sales and commissioned a report from financial analysts Grant Thornton into the matter, which will be published next month.
It is expected that the Competition and Consumer Protection Commission probe will analyse consumers’ understanding of PCPs, including the structure of the product and the options available to them at the end of the deal.
Announcing details of its probe yesterday, CPCC chair Isolde Goggin said it wanted to hear from car buyers who had problems with PCPs.
She said: ‘After a mortgage, the purchase of a car is likely to be the biggest financial commitment a consumer will make. From our interactions with consumers we know PCP is an increasingly popular way to finance the purchase of a car. However, these products are relatively new and considering their complexity there is potential for consumer misunderstanding, and detriment if they take out a product that may not be suitable for them.
In June, Mr Byrne told the Dáil that, due to the lack of regulation and Central Bank data, the car finance market in Ireland was becoming like the ‘Wild West’. And he said that regulators in the UK and US were becoming increasingly concerned about the level of debt their economies were exposed to as a result of the rise in popularity of PCPs on both sides of the Atlantic.
He added: ‘We know the Bank of England is concerned about this and examining it in terms of the impact it could have on the financial market.
‘The story about nervousness in the United States and the UK and the Irish Government looking the other way is a story we have heard before.’
Tánaiste Frances Fitzgerald said she would raise the matter with the then Minister for Finance, Michael Noonan.
In a letter to Mr Byrne, Mr Noonan said the CCPC was ‘about to undertake further research to help inform its work in the PCP area’.
The Irish League of Credit Unions said the level of complaints they receive about PCPs is on the rise.
Spokesman Emmet Oliver said people seem to be unaware that they don’t own the car until this final balloon payment is made, and that there seem to be very strict terms and conditions.