Because leasing companies usually retain the right to charge all the outstanding rentals at point of write off, customers without gap insurance can be substantially at risk if their vehicle was stolen or involved in an accident and written off
Hertfordshire, UK (PRWEB UK) 23 December 2012
The UK’s leading gap insurance specialist car2cover.co.uk today called for greater lender transparency to help consumers understand and calculate what their financial risk might be in the event of a vehicle write off.
A spokesman for the business, Tom Barley, said, “the most recent Consumer Credit Directive has provided consumers with greater transparency to be able to more easily compare offers before entering into contract, but it still leaves consumers woefully short of information on the potential financial risks if they need to end their agreement early – particularly in unforeseen circumstances such as a vehicle write off.”
All regulated vehicle finance agreements provide indicative estimates of what the finance settlement might be at four points in the agreement, 25%, 50%, 75% and 100% of the period – but customers are not being provided estimates of the vehicle’s likely value at those points to help identify the risk which can in many cases be substantial.
According to Barley, “the lack of information is even greater in contract hire and lease agreements where there is an industry-wide lack of transparency and information and no requirement to provide the four settlement estimates. Our customers are always advised to call their leasing company to establish how the settlement will be calculated if they needed to end their agreement early – and to date, none have ever been given a clear and definitive answer”.
With car manufacturers increasingly offering extremely attractive leasing deals to tempt customers into their product, the call for greater transparency to enable customers to more easily assess risk is valid.
Contract Hire in particular is marketed and sold on its simplicity.
Contract Hire and Personal Contract Hire is simply a longer-term car hire arrangement. In it, the hirer pays a fixed monthly payment and returns the car to the leasing company at the end of the chosen period.
The total of all the rentals collected, together with the proceeds from the sale of the vehicle at the end of the term, are calculated at the outset to cover the original cost of the vehicle, finance costs and any other chosen services such as maintenance and provide a margin for the leasing company.
It certainly sounds simple enough and is obviously an attractive proposition, so why are customers denied the information they need to assess their risk?
“Because leasing companies usually retain the right to charge all the outstanding rentals at point of write off, customers without gap insurance can be substantially at risk if their vehicle was stolen or involved in an accident and written off,” said Barley.
To provide customers with a wider access to information about these risks and how gap insurance might help, car2cover have launched a new web site http://www.car2covertv.co.uk where over 45 short, 3- to 4-minute video clips, together with video transcripts are freely available to view. Car2cover also offer free telephone help on 01438 728959.
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