The truth about guaranteed car finance

Guaranteed car finance is a term that’s widely misused, often intentionally, by brokers and dealers in order to give the impression that all applicants are guaranteed an acceptance for credit.

Although a guarantee of acceptance might sound good in principle there are some major flaws in making such a claim. One such flaw is the fact that brokers and dealers aren’t actual in control of lending decisions, lenders are, and they most definitely don’t approve 100 per cent of car finance applications.

Granted, some lenders do have fairly flexible criteria, partly thanks to a whole host of technology such as the black box that has been introduced to help them mitigate risk, but the reality is unless you meet the criteria, your applicantion will be declined.

The potential here is for customers to apply for guaranteed car finance with a broker or dealer on the premise that their application is guaranteed to be accepted, when this is simply not true, cars with guaranteed finance are a work of complete fiction.

The law on guaranteed car finance

An advertisement for any form of finance is regarded as an invitation or inducement to engage in investment activity, in the case of car finance it falls under the provision for consumer credit.

Under this provision any advertisement must be fair, clear and not misleading, by using the term guaranteed car finance, brokers and dealers are in breach of all three principles. This could not only lead to an FCA led investigation and the possibility of enforcement action being taken against the business in question, but also senior executives who, under the FCA regime have a personal responsibility to ensure their business is compliant.

Not only do consumer credit firms have to follow the rules that have been drawn up under the FCA regime, but must also fulfil their legal requirements under the Consumer Credit Act (CCA) and secondary legislation.

The Advertising Standards Agency (ASA) also has some jurisdiction over advertisements made for guaranteed car finance, though this only covers TV and Radio, other formats remain the remit of the FCA.

Regardless of the law, rules and legislation, offering 100 per cent of people car finance regardless of their circumstances and ability to pay the money back simply isn’t ethical. It also doesn’t make for a great business model as lenders rely on their money being repaid so that they can afford to lend it out again.

Guaranteed car finance and upfront fees

Where guaranteed car finance is supposedly available, some brokers charge a one off fee, beware though because even after paying up, there’s not only no guarantee you’ll be accepted, but you’ll also be out of pocket.

Fees charged by dealers and brokers for guaranteed car finance can amount to anything from £50 upwards and some even offer a money back guarantee, though this is often bound so tightly in terms and conditions that very few people are likely to receive a refund.