Car loan: watch out for bad practices

The light turns orange for some car credit professionals. The Directorate General for Competition, Consumption and the Suppression of Fraud (DGCCRF) has just published a survey, coupled with an inventory of fixtures on automobile financing and bad practices observed in the sector. In its viewfinder, car dealerships, financial subsidiaries of manufacturers and partner credit institutions that do not comply with regulations relating to consumer credit.

The survey mainly concerns rental credits with option to purchase (LOA) offered to finance the acquisition of a vehicle. Of the 237 establishments checked, more than a third do not cross the finish line. Result: 50 warnings, 19 injunctions, 14 minutes and 2 administrative fines.

Rental with option to purchase takes off

Rental with option to purchase takes off

Two solutions meet the new consumption habits of motorists. Long-term rental (LLD) offers the possibility of driving a new car without the maintenance constraints. No shortcomings were observed in this area.

For its part, rental with option to buy (LOA) is attracting more and more French people. In strong growth compared to January 2015, it recorded a jump of + 53.9% according to data from the French association of financial companies (ASF). This financing solution makes it possible to rent a vehicle by paying rents and to become its owner at the end of the rental contract. The redemption price is equivalent to the residual value, the difference between the purchase price and depreciation. This is planned from the start in the contract (which must be reread).  

Deceptive practices pointed to

Deceptive practices pointed to

No breakdown on the side of the dealers and manufacturers who are building up a fleet of recent used cars while competing with the banks’ offer and retaining their customers. Everyone is supposed to find their account there but many failures are pointed out by the DGCCRF.

Its inventory revealed ” significant violations of consumer rights ” and ” contentious advertising practices “. Misleading, some advertisements display a high-end vehicle while the advertised monthly payments actually correspond to an entry level. Pre-checking (ie, ticking boxes by default in a form), non-compliance with the withdrawal period, incentives to take out unnecessary contracts… all these abusive practices which should alert the driver.

Good to know: “car credit” is a trade name which corresponds to a consumer loan. It is actually a personal loan, a restricted loan or a revolving loan. To find out about interest rate trends, take a look at the borrowing rate barometers for Auto Loan.

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