RECKLESS CAR LOAN SALESMEN EXPOSED

Jobless offered new top-brand cars Dealers give advice to beat credit checks Tactics fuel fears of financial crash

YOUNG drivers are being tempted into dangerously high levels of debt by car dealers offering them new vehicles for no money up front.

Ruthless salesmen are offering customers Audis, Vauxhalls, Suzukis and Fords worth up to £20,000 for no deposit – even if they admit they are unem- ployed, on low wages or have a poor credit rating.

But the deals commit them to paying hundreds of pounds per month for years. If they fail to keep up payments, they face having the cars repossessed and court orders forcing them to pay the outstanding loan.

The findings by undercover Daily Mail reporters come amid fears that irresponsible lending by car dealers

is risking another financial crash. experts fear that if huge numbers default on loans, it will cause a domino effect that could cripple the city.

last night, MPs and campaigners called for an urgent crackdown on the ‘reckless’ lending, while Vauxhall and suzuki launched probes into the conduct of their dealerships.

city watchdog the Financial conduct Authority is already investigating ‘irresponsible lending’ in the motor industry. Among the Mail reporters’ findings:

one salesman told a 24-year- old how to write a credit check form to ensure he was approved;

Another tried to sell a £15,000 Audi to a young man who said he was out of work;

elderly drivers are also targeted, including a 71-year-old left in £3,500 debt after having a heart attack.

in some cases, dealers are contributing up to £1,000 to the personal contract purchase (PcP) deals and offering zero per cent interest rates as incentives. some pay-monthly deals result in the driver eventually paying less for the car than if they had bought it for cash on the day.

Dealers do this because the vast majority of drivers on PcP deals don’t pay off the car in full. they pay monthly for a few years before returning the car and starting a new deal – a cycle they continue.

there has been a surge in motorists taking out loans for new cars and defaulting on payments. in a chilling echo of the sub-prime mortgage crisis of 2007, car finance firms packaged and sold £5.5billion of risky loan debt to investors last year – twice as much as the year before. last week, the Bank of england warned that drivers owe £58billion on car finance – an increase of 15 per cent in a year.

the deals allow drivers to have a new car for a few years in return for monthly payments. At the end of the contract, they are given the option to pay off the remainder and own the car, or to return it. there are strict mileage limits, and drivers are charged extra if they damage the car. to end an agreement early, they have to pay off at least half of their debt.

if the driver falls behind on payments, the finance company can repossess the car and apply for a county court Judgment (ccJ). An order can be made so the money is automatically taken from the owner’s wages. A charge can be put on their home, their bank accounts can be frozen and bailiffs can seize possessions. the ccJ stays on their credit file for six years, making it difficult to get a mortgage or a personal loan.

Buyers do have to pass a credit check, but unlike mort- gage checks, car finance providers don’t usually sift through bank statements to see whether the car is affordable.

Many providers offer these deals as long as the monthly payments don’t exceed a quarter of their take-home pay, meaning drivers earning just £8,200 a year can walk away with a new £12,500 Ford Fiesta.

our undercover reporters visited 22 dealerships. At an Audi dealership in edinburgh, a reporter who said he was unemployed was offered a £15,000 car with no deposit. A reporter who said he was working part-time on the minimum wage was offered a £15,000 seat ibiza without a deposit at a seat dealership in Manchester.

Another reporter suggested that he had bad credit, but he was offered an £8,600 Vauxhall corsa in Birmingham.

Kevin Barker, 71, found himself £3,500 in debt when he suffered a heart attack six months into a PcP deal. He said a ‘pushy’ toyota salesman ‘pressured’ him into taking out a 36-month agreement in november 2014 and he was not told of the repercussions if he fell ill or lost his job.

Mr Barker, of Warton, lancashire, was forced to retire after the heart attack. He said: ‘i don’t want anybody else to get into a situation like this.’

toyota Financial services said: ‘it would be inappropri- ate for us to comment on an individual case. We are committed to treating our customers fairly.’

the billions in car debt is increasingly being sold to investors. they make money on interest and, if people default on their payments, the cars can be repossessed. But with increasing numbers of new cars sold on three to fiveyear PcP deals, the secondhand car market is being flooded, bringing values down.

the Bank of england warns that if the value of secondhand cars keeps falling, banks risk losing as much as £1.7billion. this could lead to spiralling costs for consumers. Governor Mark carney said lenders appeared to be ‘forgetting the lessons of the past’.

tory MP Huw Merriman said: ‘reckless lending can destroy the economy. it also has a devastating impact on those who get in to serious debt. if the industry cannot get its house in order then our regulators need to take action to protect us all from the practices uncovered by this investigation.’

James Daley, of consumer website Fairer Finance, said: ‘none of the lessons coming out of the 2008 financial crisis have been learned.’

Vauxhall, suzuki Finance, Mazda and Volkswagen Financial services, which finances Audi and seat cars, said the Mail’s journalists did not go through with credit checks and anyone with poor credit would be declined.

Ford credit did not respond to requests for comment.

‘Reckless lending’

ANOTHER major threat to Britain’s financial stability is ballooning consumer debt – currently an eye-popping £240billion. According to the Bank of England, £58billion is owed on car finance alone.

So our report today that young motorists – even those who are unemployed – are being tempted into huge debts by dealers offering new cars on finance deals without any deposit, makes disturbing reading.

In a chilling echo of the sub- prime mortgages scandal, these debts – many of which will inevitably end in default – are being packaged and sold on to big financial investors. The Financial Conduct Authority must stamp out this recklessness with the utmost urgency.

The bitter experience of 2008 showed us only too vividly where dangerously irresponsible lending can lead. SO Jeremy Paxman finally realises his former employer the BBC has a weakness for being politically correct and that the licence fee is antediluvian. It’s taken long enough to sink in – but perhaps he needed to step outside the Corporation to see how biased and bloated it really is. AT last the penny has dropped! Italy wants to replicate the immigration arrangement Britain has at Calais by processing migrants in Libya, rather than waiting until they arrive in leaky boats from across the Mediterranean. We wish them well – if they get it right, they will save countless lives. The only question is, how will the Italians manage to strike a deal with a country in such chaos that the government does not even control its own capital city?