Low interest rates over the last decade may have encouraged more and more motorists to purchase a car on finance rather than buying outright, but very few drivers actually understand what they’ve signed up for, new research reveals.
A majority of car buyers in the UK are completely unaware of the meaning of widely used car finance terms, despite 77 per cent of new cars being bought with car dealer finance, a survey of more than 1,000 car buyers carried out by BMW Group Financial Services has discovered.
Terms confusing buyers include “personal contract hire”, “personal contract purchase” and “gap insurance”, with less than 20 per cent of buyers being able to explain the ins and outs of personal contract hire and personal contract purchase.
Simplified motor finance is long overdue and we are responding to a public need for clear terms.
This comes as the use of new car finance jumped by more than 10 per cent last month, reports Motoring Research, with some brands seeing nearly 90 per cent of their sales being made with personal contract purchase schemes. Showing the depth of confusion in the finance options, 28 per cent of drivers were unable to understand any dealer jargon.
Responding to the survey, BMW Group Financial Services’ general manager Suzanne Gray said: “These results go a long way to illustrating the state of the nation’s knowledge about finance.
“Simplified motor finance is long overdue and we are responding to a public need for clear terms.”
Thanks to a seven per cent increase in new car sales this year over 2014, the UK car industry has now seen 40 consecutive months of growth, with ever larger numbers of buyers now relying on finance when purchasing a new car.
Click here to read our helpful finance jargon-busting guide.