NCA urges consumers to do their homework on car hire-purchase agreements
- Car finance deals are often hire-purchase agreements not personal loans
8 July 2010
The National Consumer Agency (NCA) today encouraged consumers to study hire-purchase "car finance" agreements carefully if they are purchasing a new or second-hand car.
This comes as the latest figures from the Central Statistics Office (June 2010) revealed that almost 53,000 new cars have been sold in the first five months of this year, up 41% on the same period last year. The NCA is also aware of increased enquiries from consumers on hire purchase.
With the recent increase in car sales, the NCA is concerned that many consumers may be unwittingly signing up to hire-purchase agreements without understanding the implications.
Also, consumers who are looking to return their car and end their repayments have particular obligations, which they may not be aware of. Others are unable to meet their monthly repayments and are concerned about having their car repossessed, or are falling into arrears and want to know what their options are.
Ann Fitzgerald, CEO of the NCA, said: "Hire-purchase agreements are often presented as 'car finance deals' and as a result many consumers think they are signing up to a personal loan. The key difference between a personal loan and a hire-purchase agreement is that with a hire-purchase agreement you don't own the car.
"The car is owned by the car finance company and ownership is only transferred to the consumer once the final repayment has been made. This means if you run into difficulties, you cannot sell the car to repay the debt.
"We know that there can be confusion when it comes to hire purchase. If you have a hire-purchase agreement and are experiencing problems meeting your repayments, check the information on our website, itsyourmoney.ie, and then contact the car finance company. If you're considering taking out a hire-purchase agreement, you need to be clear what your options would be if you ran into difficulties in the future."
- If a consumer has paid half the hire-purchase price, they can end their agreement under the half-rule and return the car. They should do so in writing - a sample letter is available on itsyourmoney.ie. They should not phone, or sign a "voluntary surrender" form
- If they have not paid half the hire-purchase price and cannot afford to bring their payments up to half the hire-purchase price, they can voluntarily surrender the car by signing a "voluntary surrender" form. The finance company will sell the car and the money goes towards the consumer's debt but they will still have to make repayments until the entire debt is paid off
- If a consumer is in arrears, they can still avail of the half-rule, provided they have paid half the hire-purchase price, but they will still be liable for any missed repayments. They may also have to pay surcharge interest and repair costs
- If a consumer has paid less than one third of the hire-purchase price and has missed repayments, the car finance company can take back the car without taking legal action against them. If the car is repossessed, they will usually have to pay extra costs on top of what they already owe the lender. These costs may include a repossession fee and towing or trace fees, if the finance company had to tow or find the car
The personal finance website of the NCA, itsyourmoney.ie, has a comprehensive section on hire purchase, including what consumers should consider if they are thinking of taking out a hire-purchase agreement, consumers rights and responsibilities if they are having difficulty making their repayments, information on how to calculate half the hire-purchase price and a sample letter for consumers who wish to end their agreement under the half rule.