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Warning Signs Emerge in the UK Car Finance Market

Warning Signs Emerge in the UK Car Finance Market

More and more people in the UK have started buying cars on loans. Even people with bad credit continue being given loans to buy more cars. The banks fail to learn from their previous mistakes of car finance for bad credit customers. All this has resulted in the warning bells going off. Many regulators now fear that increasing car loans will lead to another financial crisis of sub-prime loans.

Individuals already indebted continue being able to loan more money from banks. The banks keep giving out such loans for car finance for bad credit. Bad creditors are likely to continue being bad creditors in the future too. This means they won’t be able to pay back their loan. All of this will potentially lead to an economic crash. The crisis seems impending since interest rates and unemployment keeps rising.

Growth in Personal Contract Purchase Plans

Getting car finance even with bad credit has now become easier with personal contract purchase plans. These plans allow customers to lease the car they want. In PCP (Personal Contract Purchase), customers pay an initial amount and then go on making monthly payments. Banks continue making their past mistakes by giving loans to bad creditors. So it logically follows that a financial crisis is unavoidable because of the mistakes made by banks.

Subprime Lending

There was recently the financial crisis in the housing authority where sub-prime loans being given out. Regulators fear that a similar crisis will hit the UK soon. Although so far sub-prime car finance for bad credit is very little. But that does not take away from the fact that sub-prime loans do exist. Some of those sub-prime loans are being used to buy cars. All of this will eventually lead to a crisis of sub-prime loans in the car finance industry.

 

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