car finance industry crackdown saves drivers £165m

The FCA has investigated the car finance industry across the past two years

An incoming commission ban will save drivers £1,100 each.

From this report, it has emerged that certain car dealerships have been earning commission on the interest rate set. This in effect, “creates an incentive for brokers to act against customer’s interests” according to the FCA. Essentially, the higher the interest rate for the customer, the higher the commission the dealership receives. Commissions encouraged brokers and dealerships to act against what is best for customers.

The FCA report published in March 2019 states “some motor dealers are overcharging unsuspecting customers over a thousand pounds in interest charges in order to obtain bigger commission payouts for themselves”. This led the FCA to remove this type of commission. Which will, in turn, save the consumer money when it comes to the types of car finance deals available to them.

Additionally, they have promised to make further changes to how customers are told about these commissions. Ensuring that in the future they are aware of what is being presented to them. This will allow customers to choose the right deal once they have all of the facts.

Adrian Dally, from the Finance & Leasing Association, said this is, “good news for the industry and consumers, as it delivers clear rules and a consistent approach to commissions”.

This is great news for car finance customers and the industry alike. Creating this sense of transparency makes the market landscape clearer for everyone. Making all sides happier by creating better, fairer deals for all. It will also make the market more competitive, presenting customers with the very best options.

The FCA went on to say, “We have found a significant difference in the amount of interest customers pay when taking a motor finance deal arranged through a broker who benefits from a discretionary commission model compared to a flat fee model.”

The Financial Conduct Authority will have completed the plans ready for 2020. Here at motorly, we do not charge a fee for arranging car finance, nor do we make a commission on car finance interest deals. We strive to find our customers the best deal available to them at all times. Another win for motorly customers!

Want to find out more about the different types of car finance? We explain everything here.