Car buyers warned over costly hire purchase deals

Consumers were warned today they could be paying thousands of euro over the odds for cars if they sign up to costly hire purchase deals.

With the New Year a popular hunting ground for car buyers, the Financial Regulator urged people to watch out for hidden charges, penalties and inflexible contracts.

Mary O’Dea, consumer director at the watchdog, insisted consumers should weigh up all the options, such as bank loans, before signing agreements.

“It is important to get a good deal but it is also very important that you know what you are getting in to, so if you are offered finance at a garage, look beyond the monthly repayment and find out what sort of agreement it is,” she said.

Ms O’Dea said buyers should check out banks, credit unions and finance houses to see what’s on offer.

“It is important to get a good deal but it is also very important that you know what you are getting into, so if you are offered finance at a garage, look beyond the monthly repayment and find out what sort of agreement it is,” she added.

The Regulator’s car finance survey revealed Permanent TSB offered the cheapest deals.

The APR offered by Permanent TSB is 7.9% for cars worth around €8,500 leaving buyers to fork out more than €1,000 for finance, while an APR of 6.9% for motors valued at €22,000 cost €3,408.

Ford Credit offered the most expensive finance deal out of those surveyed. A hire purchase agreement on a car worth €8,500 could cost €1,346 while a deal for a car worth €22,000 could cost €4,560.

Other lenders offering some of the cheapest deals include Lombard and BNP Paribas. While dearer lenders include Friends First and Bank of Ireland.

The Regulator warned consumers to make themselves aware of default charges before signing contracts. These fees, payable if instalments are missed or agreements are altered, can run from as little as €1 for a letter to €500 for repossession.

The survey also warned that with hire purchase the buyer does not own the car until the last payment. And it said buyers may have to pay half the total cost of the car in penalties to end the contract early.

The Regulator also has a personal loan cost survey on its website www.itsyourmoney.ie to help consumers.