A NEW ban on confusing and expensive charging structures will save drivers thousands of pounds when buying a new car.
The change in rules, which came into force this week, bans motor finance companies from earning more money by selling drivers more expensive deals.
It is specifically outlawing a type commission model where the amount of money that a broker earns is linked to how much interest the car buyer has to pay.
The FCA ruled that these arrangements meant car finance companies were incentivised to put their customers on worse deals.
The watchdog has estimated that the new ban will save customers £165 million a year in commission fees.
Per customer, this could work out as a saving of £1,100 on a new motor or £275 each year of a four year contract.
Ways to cut down on your fuel costs
HERE are some tips on how you can slash the cost of fuel.
- Make your car more fuel-efficient. You can do this by keeping your tyres inflated, taking the roof rack off, emptying your car of clutter and turning off your air con when driving at lower speeds.
- Find the cheapest fuel prices. PetrolPrices.com and Confused.com allows you to search prices of UK petrol stations. All you need to do is enter in your postcode and tell it how far you want to travel (up to 20 miles).
- Drive more efficiently. Some ways to do this, include:
- Accelerate gradually without over-revving
- Always drive on the highest possible gear
- If you can, allow your car to slow down naturally as your brake is a money burner
- Re-starting your car is expensive, if you can keep moving
These individual savings were calculated by the watchdog, using a typical four-year motor finance agreement of £10,000.
An FCA report said: "It is not clear to us why brokers should have such wide discretion to set interest rates or to adjust the rate to – in effect – pay themselves more commission."
Now, under the new rules, discretionary commission models are banned, and brokers will have to charge flat fee commission.
An FCA spokesperson said: "By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers."
The watchdog has also changed the way in which customers are told about the commission they are paying to ensure that they receive more relevant information.
These disclosure changes apply to many types of credit brokers and not just those selling motor finance.
Drive down the costs of keeping your motor on the road with our cash-saving tips.
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Martin Lewis explains how to knock hundreds of pounds off your car insurance bill.
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