Dealerships can make vast profits on PPI so are keen to sell it, whatever their customers' needs. This leads to inappropriate sales where people are unwittingly paying for cover they didn't realise they had, are misled into believing a PPI purchase is mandatory or have policies they cannot claim on because the exclusions weren't explained properly beforehand.
Braintree, Essex (PRWEB) March 10, 2009
Last week's interest rate cut may well tempt those still in jobs to splash their spare cash on the latest registration cars, however they could unwittingly be exposing themselves to Payment Protection Insurance scams says PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.
Sara-Ann warns that motor dealers will be using the March 2009 registrations as their 'window of opportunity' to make a sale and suggests that as consumers succumb to end of the month offers and finance deals, they will also be pressured into taking out PPI to cover any loan repayment costs.
PPI pays a monthly benefit for up to a year to claimants who are unable to meet their ongoing financial commitments due to the loss of salary following an accident, sickness or unemployment.
She comments: "Dealers are increasingly desperate to boost their car sales and know if they're left to organise the finance, then PPI will follow. With High Street lenders reducing their credit flows, people are turning to dealerships for loans. And this is when the pressurised PPI selling comes in, advisers either play on people's insecurities, quote redundancy and suggest it's vital customers purchase PPI before taking out a loan, infer PPI is a condition of the credit offer or hide its cost in the overall loan repayment figures. Not only is this unscrupulous, but the premiums are exorbitant - it's well-known independent PPI providers are 10x cheaper."
Sara-Ann agrees that PPI provides a vital financial safety net for many during this current economic climate, but urges consumers not to take cover with their credit provider. She continues: "Dealerships can make vast profits on PPI so are keen to sell it, whatever their customers' needs. This leads to inappropriate sales where people are unwittingly paying for cover they didn't realise they had, are misled into believing a PPI purchase is mandatory or have policies they cannot claim on because the exclusions weren't explained properly beforehand."
"Perhaps this is the reason the National Franchised Dealers Association was horrified when the Competition Commission in January announced a 14 day ban on credit providers selling PPI at the same time as the loan is taken out. It said the ban would leave buyers vulnerable and would not work as customers forget to purchase PPI - which in my view is rubbish. People are keen to save money whatever the product, so must shop around for alternative low-cost cover if they feel it's suitable for their circumstances. Especially as dealers' were recently fined for mis-selling PPI."
In August last year, five motor retailers were fined £175,000 by the Financial Services Authority for exposing 2,175 customers to the risk of being sold unsuitable PPI policies.
The Finance and Leasing Association reports 53% of people buying cars through dealerships used their 'in-house' loan facility, up from 47% in 2007. "This means more people could be paying over the odds for, in many cases, worthless PPI," Sara-Ann suggests.
According to the Society of Motor Manufacturers & Traders new car registrations fell to 2.1million in 2008, down from 2.4million in 2007 and this figure is expected to shrink by a firth by the end of the year. In February there were 54,359 registrations, 21.9% fewer than January's 112,087. When registrations fell to 66,225 in August 08 it was then the lowest since 1966.
Sara-Ann concludes: "This indicates people are wary about taking on new financial commitments, but are they so wary when it comes to taking out PPI? We're told it's never been a better time to buy a car and I agree, it probably is; but check the accompanying loan conditions and APR and shop around for credit before making a commitment. Equally, do the same for PPI - request that the PPI cost is separated from the loan, ask for it to be priced per £100 of benefit and read through the terms and conditions and understand what the policy providers. This not only makes it easier to compare the cost and benefits to other providers, but could save thousands in the long run."
"Independent PPI providers do not make the same vast profits as those offering cover alongside the credit. They do not need to inflate their premiums to make up for any credit losses and leave purchasers to make their own decisions by explaining everything clearly up front."
Standalone firm - British Insurance - charges £3.40 per £100 for unemployment cover and £3.90 for accident, sickness and unemployment protection and has won numerous awards for its policies and the way it treats customers.