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IF you watched some festive television in recent weeks or spent some of your break scrolling through your social media feeds, there is a good chance that at some point, nestled between the adverts for the Boxing Day sales, you saw a message asking whether you had bought motor finance recently.
And it is even more likely that the advert was posted by a claims company, saying that the finance might have been mis-sold and that you should talk to your lender as you might be entitled to compensation.
But while the “noise” in the UK about discretionary commission and the subsequent redress scheme announced by the Financial Conduct Authority may have left some people wondering whether they have been similarly affected, the reality, says the chief executive of Reto Finance, is rather different in the Island.
“Lending in Jersey and the UK is very different,” explained Adam Dawson. “Firstly, the sale of finance in the UK is a regulated activity, so whether you are a dealer, lender or bank, if you are selling motor finance, you have to do so in a certain way.
“In Jersey, lending isn’t a regulated activity, although it is possible that some legislation will be introduced locally before the end of the year. However, because of the nature of the Island, in many ways, lenders regulate themselves. As word travels fast through the community and people share opinions online, if a lender did something that was deemed to be unfair or unreasonable, that would quickly become widely recognised across the Island and the business would probably cease to exist.”
And this is not the only reason that Adam warns people about the “potentially misleading” adverts they might have seen.
“Motor finance is a well-established way for people to buy cars and, in that respect, Jersey is no different from countries around the world,” he reflected. “Not many people walk into a car dealership with enough cash in their pocket or money in their bank account to pay for their vehicle outright. In fact, between 80% and 90% of all buyers borrow money to fund their car purchase.
“It is therefore in consumers’ interest to have as many lenders as possible operating in that market to increase competition and keep costs as low as possible. The adverts and noise around mis-sold car finance in the UK risk driving lenders out of the market, as they think there is too much risk associated with such products, and therefore customers have less choice.”
But while recognising the benefits of choice, Adam also stresses that there are key factors customers should consider when selecting both their finance and, ultimately, the car which they choose to drive off the forecourt.
“If you are thinking about buying a car, you should be as well informed about the vehicle and the purchase as possible,” he said.
“It is particularly important to know whether you are paying a fair price for the car, something of which people can lose sight when they see a vehicle, fall in love with it and are swayed by emotion.
“However, it is important not to let your heart rule your head and to consider whether the car has been correctly priced. That is where our specialist team can help, as we have access to valuation tools which will confirm the fair price for any make or model of vehicle.
“While some makes, such as Land Rover and Mini, are particularly popular in Jersey and may therefore command a slight premium, understanding the car’s true value before getting into a serious conversation about buying is very helpful.
“Similarly, if you are planning to trade in a car as part of the transaction, knowing the value of that vehicle is also valuable. With both figures available, you can then see the difference, enabling you to make a more informed and considered decision.”
Highlighting that it is not just when it comes to the pounds that the Reto team can help to advise on purchase decisions, Adam also points to the importance of provenance.
“I saw a video recently which told the story of a UK resident who had bought a car from an auction site,” he said. “He paid more than £20,000 for the car, which it later emerged had been stolen. The way that the vehicle had been presented was very clever, with all the details, including number plates, the logbook and chassis number, appearing to be legitimate.
“While vehicle thefts may not be so prolific in Jersey, it is still important to check the provenance of a car to see whether it has been involved in an accident and, if so, whether it has been repaired, whether it was written off by an insurer and whether it has subsequently been sold.
“Through the same tools that we use to carry out valuations, we can also check the vehicle’s provenance, giving you peace of mind that you are getting what you think you are.”
Such checks, adds Adam, demonstrate that there is “a lot more to buying and funding a car than thinking solely about whether a retailer is receiving a commission payment”.
And they also, he stresses, show some of the extra value that turning to a specialist lender can bring.
“There is often a perception, particularly if someone is buying a low-cost model, that they don’t need any advice and that they are best off getting a bank loan because that will be the cheapest option,” he said. “However, not only are bank loans not always the cheapest option but the extra knowledge that a specialist can bring is hugely valuable. We can all think of situations where we have chosen not to take the cheapest option and have paid more to get better service or a product that is more fit for purpose.
“Part of our job at Reto is to explain that in a way which is easy for consumers to understand and apply in the context of buying a vehicle. If you are purchasing a car and a loan, what it really boils down to is whether you, as a consumer, think you are getting good value, and whether you think the monthly loan repayment is a reasonable amount to pay for that car.”
To help guide that decision, Adam recommends looking at the cost of “car use” rather than the cost of ownership.
“Focusing on the purchase price might not be the best thing to do because most vehicles depreciate,” he said. “However, if you think about the cost of use and budget, say, £500 a month for three years, after which you will have paid off the loan, then you can see the true costs associated with having that car.”
Key to helping people making those decisions, he adds, are the personal relationships offered by Reto’s team of specialists.
“Motor finance is something we do every day and we have a very experienced team, who understand the pitfalls and can guide customers through the process, using their tools and expertise to give extra value to customers,” said Adam. “Critically, we invite anyone to come into our office on the Esplanade and talk to us or to contact us by phone, email or through the website, so that they can benefit from that knowledge and experience.
“Our process is slick, so funding is usually agreed within a day or two, as you benefit from the agility that comes from dealing with a local team which understands the market.”
And while that market may be a “little depressed” at the moment, Adam is expecting it to pick up in the year ahead.
“There are more encouraging signs on the horizon in terms of the macro economy, and most people don’t find it economically viable to keep cars for a long time because the maintenance costs go up as the car ages,” he said. “People will therefore continue buying and trading in cars but, at a time when interest rates and inflation are higher than they have been recently, it is even more important than ever to make such purchases in an informed way.”
