BBC Money Box debate covers motor finance affordability issues

In July consumer issues of affordability and sales process in the motor finance market were covered on BBC Radio 4’s Money Box programme.

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BBC Radio 4’s Money Box show spoke with Adrian Dally, head of motor finance at the Finance and Leasing Association (FLA), to debate figures from the Financial Ombudsman Service (FoS) concerning alleged rising complaints within the motor finance market.

According to Money Box, which had received figures from the FoS, complaints about the loans secured to buy cars have trebled in the last five years. In the last year, the number of complaints rose by more than 50% from 5,805 to almost 9,000, said the FoS. Complaints ranged from the quality of the car received, a lack of information on the loan, and being sold cars on finance plans that they cannot afford.

Dally suggested that the number of complaints represent a very small proportion of the overall motor finance market, and that three-quarters of complaints are concerned with the vehicle, rather than the accompanying finance.

Stuart Masson, editor of, said that the complaints received by the Financial Ombudsman were “the tip of the iceberg”, as many complaints would not generally get that far. He said: “We have seen increases in the number of people complaining about their finance and not understanding the loans they are taking out. When you start looking across the industry, it is clear that is happening to more than just one or two people.”

However Dally disagreed with Masson, stating that the number of complaints in motor finance have in fact not gone up because of underlying complexity with the headline figure. Dally added that three quarters of complaints about motor finance were about the car and not about the finance. “Because motor finance has become more popular over the years, therefore it follows, complaints about the car have increased as well – that is what the ombudsman is saying.

“Motor finance for used cars has gone up in single figure percentage points and new cars it is about the same. Data from our members shows that complaints about the car have not changed in proportion, that’s about three quarters.

“What the Ombudsman is saying there we would dispute.”

Case example

The show spoke to one member of the public, whose daughter Victoria was sold an Audi A1 for £329 per month while she was a first year university student with a part-time job. Victoria will have paid more than £20,000 for the car when the loan contract concludes after five years, and claimed that no affordability checks were carried out prior to the purchase of the vehicle.

Dally argued that cases such as this one are “very much the exception,” with affordability and responsible lending central to lenders in the motor finance space. “It doesn’t mean that perfection is always achievable, we always want to improve standards, especially in dealerships where these conversations take place. Standards are going up, we are supporting the new rules from the FCA and that is what are members are now complying with,” said Dally.

“The number of people defaulting on loans is very low – it hovers around the 1% mark – and the Bank of England and the FCA have looked at this and noted that defaults in motor finance are lower than other forms of consumer credit.”

The industry came under scrutiny from the Financial Conduct Authority (FCA) earlier this year in a report published in March. The paper raised concerns around dealer commission structures and firms falling short of affordability assessment requirements. “This is simply not good enough, and we expect firms to review their operations to address our concerns,” said Jonathan Davidson, executive director of supervision for retail and authorisations at the FCA.

The FCA said in the report that it will be following up with individual firms that failed to reach the required standard of care, while policy intervention is expected to be introduced next year – moving to a more consumer-centric model of clarity and safety.