August 1 2014 Latest news:

As well as being expensive, car finance can be a minefield.

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So don’t get caught out by a series of scams targeted at thousands of people making what will probably be their second largest purchase behind a home.

These are the top five car finance scams as identified by Simon Gray, managing director of asset finance company Credo Asset Finance.

He has also included top tips to avoid paying more than you need to.

• Budgeting trick. A dealer will often ask you how much you can afford. Once they have this information, they’ll then offer you finance at this monthly rate, without ever divulging how much the new car is and how much they are offering for yours. Always look at the actual cost of the car, the part exchange, how much you’ll borrow and the APR.

• Extortionate guaranteed asset protection (Gap) insurance. Beware of expensive Gap insurance, paint and tyre protection and warranties. Some companies quote almost £1,000 for Gap insurance on a prestige car when you can buy it from as little as £99. Always look around for independent deals.

• I’ll speak to my manager trick. Ever been in a car show room where a salesman goes to speak to his manager to see if he can negotiate a better deal? Beware of dealers who don’t offer you the best finance there and then. Their special deals aren’t usually so special.

• Guaranteed future value. Don’t be swayed by the guaranteed future value (GFV) of your car in a private contract purchase (PCP). Why? Because you will probably pay for it in higher finance rates and you could face tough return conditions including excess mileage and repair costs.

• Invisible APR. If you are a limited company or require business finance over £25,000, an APR does not appear on paperwork as the Consumer Credit Act does not apply. Some car dealers use this as a tactic to hide expensive finance rates, so beware.

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