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 unemployed, 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 decree through the Sheriff Court system. An ‘arrestment’ order can be made, allowing the money to be taken from the owner’s wages. A charge can be put on their home, their bank accounts can be frozen and Sheriff ’s Officers can seize possessions.

Credit reference agencies are regularly updated with each decree granted and a person’s credit file is changed to reflect this, making it harder to get a mortgage or personal loan. But car finance providers do not usually sift through bank statements to see if 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 inappropriate 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.

‘Reckless lending’

THE Tories have spent seven hard years building a reputation for fiscal responsibility. Yes, those years have demanded sacrifices from workers in both the public and private sectors. But the benefits have been immense.

Lower corporation tax has led to record employment. Higher personal allowances have taken four million low earners out of income tax altogether. Growth figures are among the strongest in the developed world and Britain’s renewed financial credibility has allowed us to borrow money at minuscule rates of interest.

From the toxic financial legacy bequeathed by the last Labour government, this has been a remarkable turnaround.

But we should be under no illusion. The job is far from done. Our annual deficit, though reduced by almost two-thirds since 2010, remains above £50billion and our total national debt has soared to a terrifying £1.7trillion. Just paying the interest will cost around £40billion this financial year.

So the Mail is deeply troubled by reports that some Tory MPs, including senior ministers, are demanding that the spending taps be turned back on. Panicked by the apparent popularity of Jeremy Corbyn’s anti-austerity agenda, they want to lift the public sector pay cap and discuss allowing expenditure to rise in other areas.

So which of Mr Corbyn’s fantasy-land policies would they like to adopt next? Scrapping the welfare cap? Sharp rises in business and personal taxes? A public borrowing binge?

Instead of giving credence to Labour’s economically illiterate agenda, they should be challenging it. For all the shroud-waving about so-called austerity, we still spend more than in 2010 and in some areas, notably health and pensions, budgets have soared. Borrowing to increase state expenditure even more is the road to ruin.

For all Mr Corbyn’s populist rhetoric, the arguments for financial responsibility – both economic and moral – are unassailable. To create a prosperous nation for future generations, we must live within our means. The alternative is to betray our children and grandchildren by saddling them with a crippling burden of inherited debt.