MOTORISTS keen to jump behind the wheel of an 08 number plate on March 1 should clunk- click their finance deal to dodge the obstacles of redundancies in 2008, says standalone PPI provider Paymentcare.co.uk.
As March 1st draws near a predicted 425,000* new cars will roll onto the roads and lenders will be rolling out loans to motorists who can’t afford to pay upfront.
But with alarming new figures on predicted redundancies**, protecting a personal loan with some form of insurance that will take care of the repayments in times of financial difficulty has become more than just an optional extra.
“Since this time last year – in fact, since the last new registration cars went on the road – two things have changed that every borrower needs to take into account,” says Paymentcare.co.uk MD Shane Craig.
“The credit crunch has brought the threat of job loss and consequent financial difficulty much nearer to a great many people. This shouldn’t be viewed as something that will only happen to someone else. I’m not suggesting that anyone should freeze their spending or borrowing, just that they need to arrange a safety net to protect their financial commitments should they lose their income.
“Secondly, over the past year lenders’ own single premium loan payment protection insurance (PPI) has been exposed as massively overpriced and the sales methods of some as punishable by huge fines***.
“Motorists approaching any lender for car finance are likely to be offered PPI at the same time but unless they are aware of the alternatives, they could be buying cover inappropriate to their needs at unnecessarily high prices.”
As a defence against the effects of job loss, accident or illness, PPI can be one of the best ways to weather the storm and remain standing but, as recently highlighted again by the Financial Services Authority, despite extensive regulatory work in this area many firms are still failing to treat their customers fairly when selling PPI**** – and that won’t help anyone.
“Yes, buy a new car, and yes, borrow the money to pay for it if you can afford the repayments, but don’t accept your lenders’ PPI as the best way of protecting that loan,” says Craig.
The same level of protection can be bought for much less from standalone providers who have nothing to sell but insurance – no car, no loan, just PPI.
“Credit agreements and PPI should run in parallel lines that never meet,” says Craig. “Blurring the point of sale of both presents an opportunity for mis-selling that is not in the customer’s best interest.”
* 425,000 new cars are expected to be registered in March 2008 by the Society of Motor Manufacturers
& Traders, 20 February 2008
** A survey by the Chartered Institute of Personnel & Development showed that one in four firms expect to
make redundancies this year - 10 February 2008
*** The Financial Services Authority imposed a fine of £1,085,000 on HFC Bank for failing to take
reasonable care to ensure that the advice it gave customers to buy PPI was suitable and for failing to
have adequate systems and controls for the sale of PPI between January 2005 and May 2007.
**** Speech by Sarah Wilson, Director of Treating Customers Fairly, Financial Services Authority, 12