Bounce back loan fraud impacts car finance industry
Car finance brokers and providers are seeing decreased business due to consumers fraudulently using bounce back loans to purchase cars outright, according to a broker in the space.
Zac Choudhri founded car finance brokerage Prime Personal Finance in January and has since diversified into selling cars as well.
He said that he has seen customers eschew his in-house finance brokerage in favour of bounce back loans.
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Bounce back loans come with a 100 per cent government guarantee on the value of the loan and have a 2.5 per cent interest rate, with nothing payable for the first 12 months.
“When you sell a Range Rover it’s not normally someone treating themselves to a car but to someone who is slightly better off than the average household and is able to qualify for it and buy it,” Choudhri said.
“But now we’ve sold so many on direct payment. We promote and recommend our in-house car finance brokerage and show the benefits of it, but some people said ‘no, we already have a 2.5 per cent loan’.
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“We’ve sold cars to these people and absolutely loads of people with business loans have just bought cars and this has generally affected car finance brokers and providers.
“Car prices have gone up as a result of these loans. No one was getting finance, so they raised prices on cars. It has had a massive knock-on effect.”
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