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UK examining whether car-buyers are properly assessed for credit

LONDON, March 15 (Reuters) - Britain's Financial Conduct Authority (FCA) is investigating if firms are properly assessing whether customers can afford to buy the car they are offered on credit after concerns over such sales as demand cools and interest rates rise.

Most Britons buy a new car using a Personal Contract Plan (PCP) which typically allows them to make monthly payments over three years and then trade in for a new model, with their old vehicle going onto the used market.

Some analysts also question how the residual values of diesel cars can be maintained as they come under pressure due to bans, levies and other regulatory crackdowns around the world.

In interim findings released on Thursday, the FCA said the growth in motor finance had been strongest among customers with better credit ratings and that arrears and defaults remained low, although they had risen slightly in recent years.

However, it will continue its work in three areas: whether firms are properly assessing customers, especially those with low credit scores, the risk around commission arrangements for dealers and if the detail provided to customers allows for informed decision-making.

"We are undertaking further work on responsible lending, particularly the approach taken by motor finance lenders to assessment of creditworthiness," the FCA said. "Our work will be primarily... focused on assessments for higher credit risk consumers.

The FCA expects to complete its review by the end of September. (Reporting by Costas Pitas; editing by Stephen Addison)