Car finance confusion widespread investigation reveals

UK-wide mystery shop of car dealerships reveals car finance confusion ahead of FCA review findings

Posted on 06 Jul 2018

Mystery shop of 100 car dealerships up and down the country reveals one in 10 (10%) refused to let shoppers get a better car finance deal elsewhere2.
Three in five (59%) dealers did not make drivers aware of restrictions, such as mileage and balloon payments.
One in six (17%) shoppers said the dealer was ‘pushy’, with one in five (20%) feeling uninformed after reading the paperwork.
One in three (35%) drivers say more needs to be done to educate people about car finance as 10% of drivers admit struggling to meet monthly payments4.
New ‘Car Finance Explained’ guide launches with pros and cons for funding your car.

A UK-wide mystery shop of car dealerships has revealed there is nation-wide consumer confusion about car finance, stemming from a lack of transparency and inconsistent sales practices.

The research by comes ahead of the results of an review by the Financial Conduct Authority (FCA) into the growing motor finance sector, which will review potential for consumer harm (due in September 2018)3.

The large-scale mystery shop saw undercover buyers visit 100 dealerships up and down the country. The shoppers were instructed to enquire about buying a second-hand car valued at £10,000 and to ask about the car finance options available for funding the purchase.

After visiting a dealership and finding a car within the budget, it seems some shoppers were forbidden from getting the best bang for their buck. One in 10 (10%) said the dealer refused to let them seek out a better car finance deal elsewhere. This is despite drivers being able to save over £1,000 by comparing car finance online (hire purchase)1. In fact, one in six (17%) said they felt ‘pushed’ into taking out car finance there and then.

Many shoppers also reported a lack of ‘clear and transparent’ information when they were enquiring about buying a car, which is one of the key areas that the FCA is reviewing. Three in five (59%) shoppers were not made aware of restrictions, such as mileage and balloon payments. This is particularly worrying given that further research reveals one in eight (12%) UK drivers who have taken out car finance have been stung by a balloon payment at the end of the term of the loan4, with one in 20 (5%) having been charged for going over their mileage limits4. And one in five (20%) shoppers also revealed they did not feel fully informed after reading the terms and conditions of the policy handed to them by the dealer.

In the majority of dealerships there seemed to be little clarity about the actual cost of the full loan, with just one in three (34%) dealers relaying the loan rate (APR) to shoppers spontaneously. Furthermore, many shoppers left the dealership without being informed that they may not qualify for the advertised or ‘representative’ loan rate and that they could end up paying more. In fact, more than half (54%) of dealers did not explain the APR could be higher following a credit check. Given that many drivers are finding that the terms of these loans are not being clearly explained, it is perhaps little wonder further research found one in 10 (10%) drivers have struggled to meet their monthly car finance payments4.

There seemed to be some variation when comparing main and independent dealerships, too. Of those shoppers who felt they were being pressured into a sale, those who visited independent dealerships were more likely to report this sort of pushy behaviour compared to main dealerships (59% vs 41%). In fact, main dealerships were also more likely to make buyers aware restrictions such as mileage caps and balloon payments (59% vs 42%) and buyers felt less informed after reading the paperwork at independent dealerships (55% vs 45%).

Buyer experiences at main dealerships vs independent dealerships

Total Main dealership (split) Independent dealership (split)
Felt pressured into sale 17% 41% 59%
Felt less information after reading the paperwork 20% 45% 55%
Made aware of restrictions 41% 59% 42%

While the nation awaits the FCA’s findings, it seems many drivers feel they would benefit from receiving greater clarity at the point of taking out car finance. One in three (35%) drivers say more needs to be done to educate people about car finance. So has launched a definitive ‘Car Finance Explained’ guide for drivers to find out the pros and cons of the different options available. 

However, some put the onus on the people selling the vehicles to communicate the terms of the sale in a more clear and transparent way. For example, one in four (24%) drivers say car sales people should be given better training if they are responsible for selling cars using finance, while one in three (34%) think it should be compulsory for dealers to explain that the finance for a vehicle can be obtained elsewhere3.

The research concludes that there is wide-spread confusion about car finance – a worrying prospect given it’s a market that has almost doubled since 2008, with 2.3 million consumer motor finance agreements in 20175. But education and awareness will go some way towards improving consumer experience.

Amanda Stretton, motoring editor at, says:

“Drivers need to feel empowered that they are going to get the best deal when they walk into a dealership. If drivers are not being told they may be able to get a better rate elsewhere then they could end up spending £1,000 or more than they would if they took out car finance online.

“Car finance is fundamentally confusing and far greater clarity is needed. Some drivers are landed with finance plans they don’t understand and are even struggling to meet payments as a result. It’s crucial drivers have clear and transparent information about all of the finance options available to them when buying a car. That’s why we’ve launched a guide helping drivers to weigh up the pros and cons of the different finance options available.

“We want to put the power back into the hands of drivers, so our car finance comparison service weighs up the different options side-by-side giving sight of the exact rate drivers will pay for the loan. This way drivers can be sure they have landed a great deal and put the money they could save on interest payments to better use.”


Notes to editors

1. acts as a credit broker not a lender. Saving of £1,167.32 based on a comparison of £9,000 hire purchase loan, £1,000 deposit on a £10,000 car and repayments over 48 months. Representative APR 5.9% vs dealers 11.9% median representative APR. Data source AM100. Correct 1st May. Credit subject to status. Verification available at
2. commissioned research agency PCP to conduct a mystery shopping exercise at 100 main and independent car dealerships across a range of UK locations. The participant group consisted equally of men and women. The experiment was conducted between 2nd and 15th June 2018.
3. FCA review of the motor finance market:
4. These figures were taken from omnibus research carried out by One Poll on behalf of This was an online poll of 2,000 UK adults who drive (national representative sample). The research was conducted between 18th June 2018 and 21st June 2018.
5. See page 5, FCA Our Work on Motor Finance citing FCA calculations using data provided by the Finance and Leasing Association:

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Launched in 2002, was the UK's first digital marketplace for car insurance and is one of the leading brands in the sector, generating over one million quotes per month. It has expanded its range of comparison products over the years to include home insurance, van insurance, motorcycle insurance, and car finance comparison, as well as a number of tools designed to save consumers money. is not a supplier, insurance company or broker. It provides an objective and unbiased service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more.’s service is based on the most up-to-date information provided by UK suppliers and industry regulators. is the largest company in the Penguin Portals Group, which is the largest group of its kind with similar operations stationed across the world. Penguin Portals Group is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. is authorised and regulated by the Financial Conduct Authority.

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