Is there a link between the ongoing PPI mis-selling scandal and the increase in UK car sales?
The continuing PPI mis-selling scandal has affected all manner of things. Consumer trust in the big banks has steadily dropped off since the financial mis-selling scandal came to light and a whole host of new roles have been created at the Financial Ombudsman Service (FOS).
It’s fair to say PPI is everywhere. From TV adverts to pop-up banners on web pages – and now the UK car industry has been infiltrated by the PPI scandal, which is staking its territory in some unusual places.
So what on earth does PPI have to do with cars?
Unprecedented rise in car sales
It seems that UK consumers have shunned the economic gloom and are happily splashing the cash on new wheels, according to the latest figures.
According to the Society of Motor Manufacturers and Traders (SMMT), new car registrations rose by an impressive 14.8% between April 2012 and 2013.
This equates to a total of 163,357 new car registrations and is the highest figure since 2008, raising hopes that the UK car industry may be recovering in spite of the country’s ongoing financial troubles.
The remarkable sales figures are being driven not by fleet buyers but by private motorists, with private sector registrations growing by 32.3% in April and rising by 15.2% for the year to date.
How is PPI mis-selling linked to car sales?
Some people have chosen to use their PPI reclaims to help with the purchase of a car. PPI – or Payment Protection Insurance – is designed to cover loan repayments and credit card debts in the event of illness, accident or redundancy, leaving an individual without a source of income. Whilst it wouldn’t be recommended for people to frivolously spend their reclaim money, some people have used their compensation claims to buy a new car.
The average loan compensation payout received by the victims of the PPI scandal stands at just under £3,750 (iSmart Consumer Solutions, Dec 2012), which is made up of a refund of premiums, interest paid on those premiums (if they were added to the loan) and 8% for interest that would have been paid if the claimant had saved the money instead. While the average loan claim has resulted in a £3,750 refund, there have been cases of individuals reclaiming more – to the tune of £65,000.
With these sizeable lump sums boosting incomes across the country, it is perhaps less surprising that the UK car industry is experiencing considerable benefits.