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daveb47

Car finance: the fast lane to debt?

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Car finance: the fast lane to debt?

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A visit to the car showrooms around north London gives a stark illustration of how British consumers have driven themselves almost £60bn into the red.

Seemingly cheap financing deals offer the opportunity to drive away a brand new car less than two weeks from signing on the dotted line. There can be little or no deposit, while monthly payments from as little as £100 can stretch the bill over a two- to four-year period.

While credit cards and personal loans make up the bulk of a £200bn debt mountain accumulated by British consumers, car finance has seen the fastest expansion. The second most expensive purchase in the majority of people’s lives, after buying a home, is now as simple as taking out a new mobile phone contract.
There is no suggestion the sales practices are illegal or that any rules have been broken, yet they illustrate a significant shift in the way cars are bought in the UK. Salespeople at three dealerships visited by the Guardian offered vehicles on the road with little or no deposit. One suggested a £1,000 downpayment to secure a 1.5l Mini Cooper, with a top speed of 127mph, which could be refunded when the car was collected from the showroom a few days later. Deposits can even be paid for by credit card, adding to the debt pile.

Two dealerships offered to contribute to the deposit. A Volkswagen showroom offered £1,000 off the £3,500 suggested deposit on a 1.4l Golf TSI. When asked why, the salesman said it was because the finance package was put together by the German manufacturer’s own credit lending arm to encourage sales.

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It sucks people in to buying cars they don't necessarily need, to be honest. 

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