NEWS
Eager young car buyers "taken for a ride" over credit, warns TSI
Eager young motorists are running up huge debts after being persuaded to take on high interest credit when buying a car, the Trading Standards Institute (TSI) warns today.
First time buyers and those with a poor credit history are regularly being offered one high-interest loan to cover the deposit on the car and another for the balance.
Others are persuaded to take out separate credit agreements for extras such as warranties or breakdown and gap insurance, often at highly uncompetitive prices.
And there is no legal cooling off period once a deal is struck - meaning motorists cannot back out if they later realise what they have done.
Cases under investigation around the country include:
• A 19 year old dad who bought a £7,000 car and various insurances on credit - and ended up owing more than £20,000
• A 21-year-old who bought his first car worth £7,500 on credit - and ended up owing more than £15,000
• A young motorist who bought his "dream car" - a second hand BMW - for £9,000 but ran up a credit bill of more than £20,000.
The TSI and Consumer Direct - the Government-funded national telephone and online consumer advice service that works in partnership with Local Authority Trading Standards Services – highlighted the problem during National Consumer Week (November 20-24, 2006).
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"We want to ensure people don't get taken for a ride when they go out to buy a car and that instead they slow down and think," said Peter Stratton, TSI's lead officer on the motor industry. "All dealers want to secure the best profit they can on each car. Selling extras on credit, including insurances, warranties, breakdown and roadside assistance, is a lucrative sideline.
"Motorists should never sign anything without knowing exactly what their total payout will be, how much they will owe each month and whether they can get a better deal elsewhere."
Some dealers, particularly independent car supermarket outlets, appear to be exploiting the eagerness of young motorists to get behind the wheel of their first car.
"We are particularly concerned when we hear about consumers who are taking out one loan to cover the cost of the deposit and a second one to cover the remaining balance," said Mr Stratton.
"The interest rates for credit offered by most of the car supermarkets, and the cost of some of the extras, are not usually very favourable.
"We are hearing from many motorists who are pretty shocked when they read through their agreements later and realise exactly how much they will have to pay back.
"Unfortunately, there is no cooling-off period once agreements of this nature have been executed, so it is usually too late to back out," he added.
"It is vital that all buyers, particularly young motorists, think long and hard before signing any type of credit agreement. Don't expect the dealer to look after your interests - it's up to you to look after yourself."
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