Affordability concerns for car finance

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【Summary】UK consumers who have financed a vehicle purchase are concerned about the affordability of their monthly payments, according to a survey by ALPHERA Financial Services. 10% of respondents said they were 'very concerned' and 40% were 'somewhat concerned'. Affordability concerns were more prevalent among younger car buyers. The survey also found that dealers did not often discuss potential economic challenges in the future before finalizing finance agreements.

FutureCar Staff    Nov 06, 2023 5:15 AM PT
Affordability concerns for car finance

According to a recent nationwide survey conducted by ALPHERA Financial Services, half of UK consumers who have financed a vehicle purchase in the past year are now worried about the affordability of their monthly payments. Out of those surveyed, 10% expressed being 'very concerned' while 40% said they were 'somewhat concerned'.

The survey also revealed that younger car buyers are more likely to have concerns about affordability, with 55% of them stating they were 'somewhat concerned' compared to only 16% of those aged 65 and over.

Interestingly, 43% of respondents mentioned that the dealer did not advise them to consider potential future economic challenges before entering into the finance agreement, despite affordability being a crucial factor.

Consumers have varying expectations of dealers when it comes to discussing finance agreements. 66% believe that dealers have a responsibility to explain repayment obligations, 58% expect them to clarify terms and conditions and any additional charges, and 31% think dealers should disclose whether the salesperson is qualified or accredited to sell car finance packages.

Kirk Franks, the head of national sales at ALPHERA Financial Services, commented on the findings, stating that they indicate the ongoing impact of the cost-of-living crisis on car buyers. Factors such as inflation, rising interest rates, and higher fuel costs are affecting affordability. Franks also emphasized the importance of dealers ensuring fair value and transparency, in line with the new Consumer Duty.

When determining the affordability of a new vehicle finance agreement, consumers prioritize the cost of monthly payments (86%) as their primary consideration. The size of the deposit (63%) and any potential additional finance charges, such as excess mileage or vehicle damage (42%), also play a role in their decision-making process.

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