Car finance Supreme Court Ruling

[otherclive]

They have since 2021 and the commission has to be declared. On the Jeep it was something like £120, but the interest rate was 6.1% in 2022 so fairly reasonable amount considering I managed to get a £3500 repair done at "their" cost. Jeep Uk actually paid, but the finance house put pressure on them otherwise finance house would have had to pay.

I know you are experienced in these sort of matters and 6.1%?was low as general interest rates and inflation were low at that time. You were satisfied with the deal, but you still don’t know if there could have been a lower interest rate. Although the part exchange might have suffered😂

 

[Jcloughie]

The Court didn’t agree that sales person was acting in the interest of the finance provider in two of the cases. It recognised that both sales person and finance house were businesses in their own right, and had a legitimate right achieve benefit for the business. In parallel the Buyer too has a responsibility to look, or ask for alternative buying options. This is where many buyers are vulnerable as they don’t understand car financing. Salesmen are employed because they are good at selling and many buyers are nit confident to haggle. But it’s no different buying double glazing, solar panels, kitchenscetc. That’s a fact of life. When I bought my first Sorento we were nearly home before the sales mam rang and said if I could sign before close of play we had a deal.

The case that was upheld was because the Court deemed the commission unreasonable/disproportionate to the sums involved. IE sharp practice, which is the beauty of Civil cases as they are not necessarily by law or case law.

It was also useful that the Court ruled that unlike a mortgage or investment advisor a car dealer offering a loan has no fiduciary responsibility to the buyer.

I suspect the FCA will seek to close loopholes but if car dealerships loose out on commission in some way, the loss will go onto the price of vehicles.

I also noted that the court said that the customer was considered as ‘financially unsophisticated’.

I thought that was interesting terminology.

John

 

[Beardy]

I think your example is out of context as the issue revolved around the interest rate being charged when a lower interest rate could have been offered. The issue here is that the business probably did not profit from the increased interest rate, but the third party finance house and the sales person probably did profit. The sales person through the extra commission they were paid.

If by 'the business' you are referring to the car dealership then you're probably wrong. The dealerships invariably made significant commission from selling finance. One in five make more than half their margin from selling finance.* In some cases they are willing to sell a vehicle at a loss because the profit from the finance deal more than covers the loss.

* https://www.moneyexpert.com/car-fin...al Franchised,commission on car finance deals.

 

[Beardy]

I also noted that the court said that the customer was considered as ‘financially unsophisticated’.

I thought that was interesting terminology.

John

That comment made me grin too.

The fact is that far too many people don't understand *money* which is why Martin Lewis pushed so hard for financial education to be included in the national curriculum. Although I'm reasonably versed in the subject now, I'll be honest and say that I genuinely believe that I would have been much better off had I been taught it at school rather than being 'self taught' as I went through life.

 

[RogerL]

That comment made me grin too.

The fact is that far too many people don't understand *money* which is why Martin Lewis pushed so hard for financial education to be included in the national curriculum. Although I'm reasonably versed in the subject now, I'll be honest and say that I genuinely believe that I would have been much better off had I been taught it at school rather than being 'self taught' as I went through life.

Like most topics, people in general have a wide range of ability for numeracy and finance - so school education in finance would necessarily be at a restricted level - but that's not to say it shouldn't be done.

A big part of the problem is that many people buy with their heart, not their head, and financial knowledge becomes irrelevant to them.

 

[Beardy]

Like most topics, people in general have a wide range of ability for numeracy and finance - so school education in finance would necessarily be at a restricted level - but that's not to say it shouldn't be done.

I agree, no doubt some people would struggle with the subject but others (like myself) would benefit. I think that where finance is concerned a basic understanding is better than none.

A big part of the problem is that many people buy with their heart, not their head, and financial knowledge becomes irrelevant to them.

But a little knowledge may prevent them from having 'two cars on the drive and sod all in the fridge'. (Then again, in many cases it probably wouldn't )

 

[otherclive]

Like most topics, people in general have a wide range of ability for numeracy and finance - so school education in finance would necessarily be at a restricted level - but that's not to say it shouldn't be done.

A big part of the problem is that many people buy with their heart, not their head, and financial knowledge becomes irrelevant to them.

Education boards in England and Wales cover finance etc in Maths and Numeracy. It’s also covered to a greater extent in the Business subject GCSE option.

Here’s a bite size revision guide by the BBC.

GCSE Maths Numeracy (WJEC) - BBC Bitesize

GCSE Maths Numeracy (WJEC) learning resources for adults, children, parents and teachers.

www.bbc.co.uk

Accounts - Personal finance - WJEC - GCSE Maths Numeracy (WJEC) Revision - BBC Bitesize

Learn how to use accounts, manage your wages and make sense of loan payments to keep your finances on track.

www.bbc.co.uk

 

[Buckman]

But a little knowledge may prevent them from having 'two cars on the drive and sod all in the fridge'. (Then again, in many cases it probably wouldn't )

By the same token, many people have two or even three cars because of the lack of affordable public transport!

 

[otherclive]

I agree, no doubt some people would struggle with the subject but others (like myself) would benefit. I think that where finance is concerned a basic understanding is better than none.


But a little knowledge may prevent them from having 'two cars on the drive and sod all in the fridge'. (Then again, in many cases it probably wouldn't )

Crikey that’s a bit extreme. Every Friday or Saturday my wife restocks a pretty empty fridge, and takes her car. Until she returns I’m on soup and a round of sourdough. 😂😂😂

 

[Beardy]

By the same token, many people have two or even three cars because of the lack of affordable public transport!

Perhaps it depends on your location, but I know quite a few people who drive expensive BMWs / Mercedes / Range Rovers that they bought on finance when all they really *need* is a Ford Focus / Vauxhall Astra that they could have bought outright with the deposit they used to secure the finance on the expensive car.
A young friend at work was considering doing this a couple of years ago. I explained to him how much it would cost him in real terms. He'd be paying interest on £20,000 to buy a car that would depreciate in value much quicker than the car he owned at the time. After crunching some numbers he decided to keep his car for a few more years and knock a chunk off his mortgage.

 

[Buckman]

Perhaps it depends on your location, but I know quite a few people who drive expensive BMWs / Mercedes / Range Rovers that they bought on finance when all they really *need* is a Ford Focus / Vauxhall Astra that they could have bought outright with the deposit they used to secure the finance on the expensive car.
A young friend at work was considering doing this a couple of years ago. I explained to him how much it would cost him in real terms. He'd be paying interest on £20,000 to buy a car that would depreciate in value much quicker than the car he owned at the time. After crunching some numbers he decided to keep his car for a few more years and knock a chunk off his mortgage.

I have always liked nice cars, but BMWs / Mercedes / Range Rovers etc have never been on my list. Over priced and mainly a status symbol. I have generally opted for reliability and have probably had more than 15 Toyotas over the years although we did try two Dustbins Datsuns/ Nissans. The latter had extremely reliable engines, but as you drove along, you had to keep stopping to pick up all the rusted bits that fell off!