Driving Up Debt Avenue in Cost of Living Crisis
New data from the Finance and Leasing Authority (FLA) has revealed that finance on vehicles has increased by 253% over the last 14 years. Since 2009, more and more people have been relying on a car finance option to provide a suitable mode of transportation. Now that we’re in the midst of several crises, this debt is a cause for worry.
A staggering £39.6 billion is currently locked into car finance. As the energy and cost of living crises develop, those unable to keep up monthly repayments will see their car repossessed or have to declare bankruptcy. People have already been tightening their finances in a bid to save money and the FLA report shines a light on just how much debt the UK is really in.
The most common way of financing a new car is personal contract purchase, or PCP. You can own a new and used car really easily with lower monthly payments compared to other means. But the reality isn’t so simple. The average finance amount on new cars has more than doubled in this timeframe. In 2009, it was only £12,000, whereas in 2022, it’s over £25,000. Used cars have only increased £6,000 in that time.
UK wages have only increased by 33%, on average, since 2009, which has not been keeping pace with this growing debt. Used car debt alone increased 87% over the same period. Strikes have become more prominent because of the cost of living crisis and because of a stagnation in wages in this time.
This data has revealed worrying levels of debt amidst all of the crises we are currently facing. Borrowing on new cars increased £17.5 billion in the 12 months to the end of June, while the used market added £22.2 billion. Thousands of households could be without a car as situations worsen as people are already struggling to keep up payments.
The FLA has highlighted a need for greater transparency with PCP deals as people often see them as a lease or rental agreement, when they are neither. They feature a balloon payment at the end of the contract that most people cannot afford to pay, which then ropes them into more debt by taking out a new finance agreement on a new car.
Mis-sold PCP Car Finance
If you took out a PCP finance deal on a new or used car, you may not have been told about any commission that was added to your policy at the time. Likewise, you may not have been given good advice about the deal in the first place. If this is so, you could be eligible to make a PCP claim. According to the FCA, up to 95% of agreements were mis-sold.
Beat the cost of living crisis by claiming back some or all of your losses on PCP finance. Fill in a few details to get started.