A survey of 2,486 members of the UK general public by Admiral Car Finance has shown difficulties in understanding basic car finance terminology such as PCP or ‘balloon payment’.
All respondents were over the age of 18, and asserted that they held a full UK driving license and drove their own car.The first car finance term respondents were presented with was ‘HP’, to which just one third (32%) were able to correctly identify it as ‘hire purchase’.
As many as 24% of respondents incorrectly identified PCH as an hallucinogenic drug, whilst 42% thought that it meant ‘private car hire’. Just 20% correctly identified it as ‘Personal Contract Hire’, and the remaining 15% thought it was a made-up term.
When presented with the term ‘balloon payment’, 34% stated that they thought it was made up, whilst just 27% were able to correctly identify that the phrase refers to the final lump sum paid at the end of a contract.
Of those questioned on the high street on their knowledge of car finance terminology, not a single person was able to correctly describe every term. Scott Cargill, chief executive officer of Admiral Financial Services, which operates Admiral Car Finance, said: “Taking out car finance can feel intimidating and stressful as a lot of the wording and acronyms used are unfamiliar to many Brits. It’s important that car buyers fully understand the car finance products they’re taking out. Around half of respondents also said that they got frustrated when companies use acronyms when describing products.”
The findings come as a Financial Conduct Authority (FCA) report on practice by motor finance retailers is due to be released by the end of the year. Expected in the report is the organisation’s conclusions on whether information given to consumers allows them to make informed decisions.
Admiral Loans entered the direct-to-consumer car finance market in January 2018, launching with HP, PCP and personal loan products. Admiral Loans itself only launched in June 2017.