Car buyers will be given the chance to park repayments

MORE than six million car owners are in line for payment holidays to counter fears motorists will default on deals.

The Financial Conduct Authority said owners who are unable to keep up with finance terms will be offered temporary relief from payments.

After a consultation on proposals outlined last week, the City watchdog said from April 14 it would go ahead with measures, including temporary payment freezes on loans and credit cards for up to three months, and larger zero-interest overdrafts – all without affecting consumers’ credit ratings.

Christopher Woolard, FCA interim chief executive, said similar schemes would be introduced to cover car payments. He added: “There is still more work to be done, and we will be announcing further measures to support consumers in other parts of the credit market, including in the motor finance sector next week. Many people are suffering financial pressures brought on as a result of the pandemic.”

However, he warned consumers to “think carefully” before taking up the relief. “Customers should only [use them] if they need immediate help. Where they can still afford to make payments, they should do so.” The Finance and Leasing Association, whose members arrange £48billion of car financing deals a year, said it had consulted with the FCA over relief measures.

There are concerns about an impending crisis in Britain’s £75 billion car loan sector, with 6.5million vehicles on finance deals, and sales of new cars collapsing.

Most new cars are bought on “personal contract purchases” (PCP). However, with household finances under pressure, there are fears that motorists will walk away from deals they can no longer afford, flooding the market with cars and undermining the PCP system.

Stuart Masson, editor of thecarexpert.co.uk, said that PCPS had been “kicking problems down the road” as a healthy economy has hidden an underlying problem: “Consumers don’t want to pay more but want a better car. This pushes their finances to the limit without thinking what happens if they are out of work for three months.”

£75 billion

The value of the car loan sector in Britain, which helps underpin the purchase of 6.5 million vehicles on finance deals