Crunch – Are Car Loans the next subprime crisis?

A massive boom in new car registrations fuelled by new financing methods are storing up trouble for British consumers already stretched by rising fuel and food prices, according to economic analysts. Households in the UK are increasingly choosing personal contract hire (PCH) and personal contract purchase (PCP) schemes to finance new cars. Recent figures showed that a record £31.6 billion was borrowed by households last year to finance brand new cars. The figures represented a 12% increase on 2015, according to the Finance and Leasing Association. How are people financing new cars? The largest growth in car finance has been with PCPs with 90% of all new car sales now financed through this method. It involves putting down a small deposit and then making monthly payments over the following two, three, four or five years before making a final payment covering the residual value of the car or handing it back. Another rapidly growing area is PCH where a motorist makes a deposit on a new c
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