- Jon Reay
What are logbook loans?
With criminals becoming cleverer still, the process of buying a used car safely is becoming increasingly difficult. Over the last few years though, yet another potential danger has started to emerge - Logbook loans. We asked our in-house expert to give us the low-down.
Logbook loans are a very present danger, and - with the recession pushing more and more people into debt - it's only increasing.
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Essentially Logbook loan companies operate like pawn shops, but rather than handing the car over, the owner pays a monthly fee - usually at a particularly high rate of interest - to a loan company keep using the car.
How does this affect you as a buyer? Well, much like vehicles subject to finance agreements, the car rightfully belongs - until the final amount is paid - to an external company, rather than the individual standing in front of you with the keys.
Unlike vehicle finance though - where the car is subject to a finance agreement - logbook loans will
show up under any kind of vehicle history check, and you'll have no idea as to its existence until a bailiff takes the perfectly legal measure of driving your car away.
What's more, not informing the new owner of the loan isn't a criminal offence, and any grievances will need to be taken up through a small claims court - a process that costs time and money.
There's not a lot you can do in terms of protection, but I'd advise drafting a document for the seller to sign - a few sentences along the lines of "I confirm that the vehicle has no outstanding finance, logbook loan or any other debt against its registration document". It's not much, but it does at least confirm that you've asked and the seller has misled you.
Also, while HPI won't be able to confirm beforehand if there's a loan outstanding against the vehicle, they will at least cover you up to the value of £30,000. It won't be a sentimental replacement for your now-repossessed car, but at least you won't find yourself out of pocket.
Logbook loans aren't the only danger you're likely to befall, mind. Here's a cut-out-and-keep list of things to do before you buy.
- HPI check - it costs £20 and covers you up to £30,000, so do it.
- Pay for a vehicle check - the AA and RAC will do them for just over £100, and it's money well spent.
- Avoid cars without a log book - particularly from a private seller. It's madness, and HPI can't run a full check without it.
- If you're buying privately, ask to see some ID.
- If in doubt, buy from trade - you'll get increased legal protection.
- If still in doubt, buy from a main dealer - they have reputations to keep up and minimum standards to adhere to.
- Remember, the V5C doesn't confirm who owns the car, but who its registered keeper is.
- Check the service invoices as well as the book - after all, anyone can rubber stamp it.
- Where is the car registered? If the address on the V5C or service invoices doesn't match where you're looking at the car, ask why.
- Use your nose - does the seller look legit? Google is your friend, too.
- Ask questions. Sellers don't legally need to tell you that vehicles have been written off, for example, but once you've enquired they're then obliged by law to reveal any details.
- Get legal - draft a document stating that, to the seller's knowledge, no finance or logbook loans are outstanding against the vehicle. Then have them sign it.