BY Harris Cumming
CAR BUYERS are set to save up to £165 million thanks to the abolition of staged commission on car sales.
Problems have been identified by the Financial Conduct Authority, around the way retailers and brokers incentivise higher interest rates to earn more commission.
Christopher Woodward, executive director of strategy and competition at the FCA said: “By banning this type of commission, we believe we will see increased competition in the market which will ultimately save customers money”.
The FCA also looks to ensure prospective buyers are informed by dealers and brokers of the commission they stand to pay, when considering finance as an option.
Ben Kearney, a university student who pays his car up on finance, believes he stands to benefit from the news.
He said: “I think it would definitely benefit me. From the point of view of a student, it is hard, extremely hard. You get charged so much a month and my car is only a one litre.”
The 19 year old added: “It’s impossible really for someone my age. I don’t think people can actually afford to buy a car. I’ve had to do the PCP thing which is ok, but it builds up and you have to pay a certain amount of interest, so I think what they are trying to do would be great.
However, despite the potential benefits, some believe the proposed new rules could actually be detrimental to the consumer.
Sarah Nield, Director of Financial Services Risk and Regulation at PWC, argues that scrapping commission linked interest rates could actually increase costs at other points in the buying process.
She said: “Although we expect firms to comply with the spirit of the changes, it could result in unintended consequences including flat fee commission payments, car prices and bundled product costs”.