Fleet Alliance Group is calling for greater public education on the different methods of car funding to avoid confusion in the marketplace.
The Glasgow-based vehicle leasing and fleet management company has welcomed the current clampdown by the Financial Conduct Authority (FCA) on car finance broker commissions, where the amount paid is linked to the interest charged on the loan. However, it says the industry has a duty to educate the public on the different providers and products in the market.
Fleet Alliance, which manages a fleet of 37,000 vehicles valued at £1billion, says that the FCA’s plans should help clear up some of the confusion that exists in the marketplace.
But it is concerned that industry commentators and the national media saw car finance brokers, motor dealers and car leasing brokers as interchangeable entities, while in reality offering very different products and services.
Managing director Martin Brown said: “The FCA has been very clear that it wants to treat customers fairly and we welcome its clampdown on some unwelcome practises from certain car finance brokers.
“But I think we need greater differentiation between car finance brokers offering car deals based on Personal Contract Purchase (PCP) plans or other forms of car finance, and car leasing brokers offering rental hire, such as Personal Contract Hire (PCH), which this regulation is not aimed at.”
For example, a PCP is a conditional sale agreement and involves a deposit followed by equal monthly payments similar to a personal loan. Leasing, on the other hand, is a long term rental hire agreement without the option to own.
“It’s important that the car buyer understands the propositions being offered and the different routes to driving a new vehicle,” continued Brown.
“They are very different forms of vehicle acquisition and should not be confused. The public is not helped by a national media that continues to happily mix up leasing rentals and PCP payments as if they are one and the same thing.
Brown added that such erroneous media stories were liable to confuse the public further rather than protecting the consumer, the FCA’s desired outcome.
“There are many car finance brokers at dealerships offering a very good service, and PCP in itself is a useful car buying product in the right circumstances,” he said.
“But leasing brokers can only sell in a highly regulated way which includes assessing credit-worthiness and affordability before customers are presented to underwriting.
“Car leasing remains a highly consultative process, but at its heart it’s a product that is simple for the consumer to comprehend and is very straightforward.”
He concluded: “Greater clarification and understanding of the relative merits of both forms of funding would be highly welcome when the FCA reports in January.”
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