More Front than a Pirelli Calendar

Fronting is perhaps more commonly associated in the world of insurance whereby parents name themselves as the main driver of their teenager’s car in an effort to bring down the now outrageously high cost of insurance for young drivers (it wasn’t like that in my day, even for my pimped up XR2!) . However, it also applies to car finance deals where the person who wants to buy the car cannot get credit and so a creditworthy relative or friend gets the finance in their name.

To the casual eye, this simply seems like a nice gesture from said creditworthy person but increasingly finance companies are getting very jumpy about the whole thing. We have seen some T&Cs recently  where in the event of default, the finance company (and this is one of the big boys) has in its terms and conditions that the dealer will indemnify them for all payments and return any commission. This applies whether or not the dealer was aware of the fronting.

For this finance company, they say that if they can prove that the dealer was ‘in on it’, actually the word they use is collusion, then the dealer can be expected to be reported to the police. Serious stuff.

 

Authors: Nona Bowkis

Published: 16 Mar 2016

Comments

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Nona Bowkis - Lawgistics Ltd (24/03/2016)
I share your opinion but I guess from a finance company’s point of view, as it is they who are buying the car (and then hiring it to the customer), they are entitled to know exactly who they are contracting with and who will be in day to day care of their car. I haven’t looked at any terms of customer leasing contracts but there is probably something about who can drive the vehicle during its hire period and a clause against any sub hire.
Mel (24/03/2016)
What's the issue ? if a 'creditworthy person' wishes to put his status 'on the line' to help a sibling gain finance then so what ..... HIS rating is HIS TO LOSE [ i.e... if the sibling doesn't pay ] , creditworthy people know the value of being creditworthy & would likely exert influence on siblings [maybe pay for them] thus removing default risk for the Lender ! it's not dissimilar in 'concept to having a guarantor .... Are Lenders saying that a person can't commit to buy anything for someone else to use? really ! .... I wonder if that applies to the guarantee on the watch my daughter bought me ?!!
douglas (18/03/2016)
It is typical of lending institutions to try and shift all the onus for everything, onto dealers; they have been doing it in one form or another for a very long time. As for fronting, which in my view would be collusion, I imagine that provided the dealership does its job properly, (which for us absolutely includes matching irrefutable photo ID to the applicant, and properly checking insurance details,) I cannot see this as a great problem. Perhaps the big lenders ought to be looking in the mirror here. After all, their rates and their documentation fees, etc, are uncannily similar.



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