Lloyds Banking Group has scrutinised the “aggressive” deals proposed by some rivals in the car loan business, adding to rising concerns about Britain’s vehicle debt growth.
Richard Jones, managing director of Lloyds’ Black Horse group, told The Telegraph the company takes “a prudent approach” to car loans.
At the same time, some bankers behind personal contract purchase (PCP) deals may have exaggerated valuations underpinning the popular financing transactions.
There are worries that banks and car manufacturers giving PCPs could be caught with losses in the future. The Financial Conduct Authority is reviewing the car loan business, which the Bank of England assesses has risen by £30bn since 2012.
Mr Jones said Black Horse “strictly” does not give customers aggressively priced guaranteed future value (GFV) plans. Such deals offer meagre monthly payments but can trigger significant one-off “balloon payments”, referring to the car’s second-hand value, at the end of the agreement to own the vehicle completely.
The owner can make the balloon payment, give back the vehicle or put the equity they have made up towards a different car.
Mr Jones said: “We believe aggressive GFV policies – which we strictly do not have – can put customers at a disadvantage by potentially limiting their choices.”