It wouldn't exactly be breaking news if we told you that a large portion of British families is in debt. It may surprise you to learn; however, that car finance and car credit are one of the biggest factors impacting on people's inability to keep their heads above water and the problem is worsening.
In some parts of the UK, there has been a spike in applications for personal loans, and when you delve deeper into these figures, it becomes apparent that around forty per cent of people applying for a personal loan is doing so to fund a car purchase. We don't blame people for taking loans out to pay for a new vehicle, people have had to do this for many years now as the cost of vehicles has become ridiculous. Gone are the days when people could purchase a runaround for a few thousand pounds, pay for the car outright and then never have to think of anything again. Today, the runarounds cost a minimum of £12,000 and people just don't have that kind of cash laying around.
As well as personal loans, however, PCPs (Personal Contract Purchases) are all the rage and are having a massive impact on people's accounts.
On the face of it, it's a great idea. People get to drive around in the very newest vehicles (vehicles that they wouldn't usually be able to afford) and don't have to pay the cost of the car until the agreement time is up (usually every three years). Instead, they pay a monthly fee.
Unfortunately, however, we believe that the whole PCP idea is just pandering to the British mentality of having to have the very newest product, regardless of whether it can genuinely be afforded. It is this that is pushing people to the financial brink, unbeknown to many people. People are driving around in Mercedes' and Audis, and yet many of them are on the minimum wage. The reason they can do this is that they are paying monthly and don't own the car outright. The monthly outgoing will still be crippling them though, and yet they don't actually own the car! Yet again, it highlights the British mentality of having to own the very latest product, regardless of financial consequence. It actually costs people in the long run, but people can't see it.