A recent BBC article told of the plight of a young woman (23) part-time worker / part – time student, who has fell into arrears on an Audi A1 she was paying £300 per month for. This alarmed me for so many reasons.
Firstly, at the time of peak motor finance frenzy at the turn of the century, one of the rules we applied dictated that no HP or Car Loan should represent more than 25% of the borrowers net income. That was responsible lending. Even if someone has no other expenses, should they really be paying more than a week’s wages per month for their car? No. Not ever.
Secondly, the response of so many in the trade to this article was to dismiss it as non-news and that this individual shouldn’t have signed up to such an obligation in light of the fact that her circumstances could change in the future. How dare she choose now, when she’s lost her job as a time to highlight poor lending practices? The Latin phrase Caveat Emptor is used in the industry a great deal. It means buyer beware. It isn’t clever; it’s a get out of jail for the unscrupulous. Anyone using this phrase is displaying a complete and utter lack of empathy.
I’m not saying people aren’t responsible for their actions, because that would be foolish of me, but honestly, people need to be aware that the person selling them a car is invested in the economic outcome of that transaction. This alone is why this young lady thought it okay to take such a large loan out. What you really need to be aware of, are salesmen. Salesmen don’t have a crystal ball so when they tell you for a fact your car will be worth more than you owe in 3 years, bow or kneel, because you are in the presence of a true oracle.
At Kappa, we know people have needs and circumstances that change over time, we remain here to help and we aren’t afraid to tell you things that might change your buying pattern. If you tell us you can afford £300 each month the questions we then ask will be to make sure you have considered your other needs and expenses, and if we can find your car for £250, of course we’re even happier.
At the end of the day, we work in an industry where lenders and manufacturers have both gone crying to the public purse (£1.3Bn in Euro loans and £1Bn UK Govt loans last time around for the UK Car industry and the £27Bn the banks managed to need, given our industry is tied closely to the auto industry and finance industry in the USA, it’s worth noting the Big 3 Auto Manufacturers needed $80 Bn which according to Wharton, made them more competitive rather than just bail them out – look where they are now) so all I ask is that when young people who find themselves worrying about their debts have the courage to ask for help when they have so clearly been allowed to make ill informed decisions in the past, we don’t treat them poorly and we challenge the wisdom that allowed them to be in this situation.
This has been a public service rant by the good people at Kappa Car Leasing.