Mis Sold Car Finance Claims
Mis Sold Car Finance Claims
Mis Sold Car Finance Claims are a result of mis sold Personal Contract Purchase deals, or PCP, which is a form of car finance that allows you to borrow and use a vehicle from a car finance company. You will be asked to put down an initial deposit followed by a number of monthly payments. Usually anywhere between 12 and 60 months, although 36 months is typical.
The more deposit you pay, the lower the monthly instalments should be.
Car Finance is similar to Hire Purchase (HP) with one significant difference. Instead of paying off the full value of the car in monthly instalments, as you do with an HP deal, with Car Finance you're only slowly paying off the cars depreciation. So, all you are paying is the difference between what the car's worth at the beginning of the agreement and what the car dealer says it'll be worth at the end. This is sometimes known as its "guaranteed minimum future value".
Mis Sold Car Finance Claims against the lending company
As you're only renting the vehicle from the car finance company, you don't ever own the car while you're making your payments. You also don’t automatically own the car at the conclusion of the payment period, unlike with an HP deal. Your options are, you may keep the car, exchange it, or return it in good condition.
If you do want to keep the vehicle at the end of the period, you will need to make what's known as a "balloon" payment. This will cover the cost of the car, and it's this payment that transfers the ownership from the car finance company to yourself.
The FCA Final Report on the Motor Finance Sector and Mis Sold Car Finance Claims
In March 2019 the Financial Conduct Authority (“FCA”) published the final findings of its review of the motor finance sector (“FCA Review Findings”). It followed widespread reports of very questionable incentive structures in the motor dealership market and of the aggressive marketing of Car Finance “PCP” (personal contract purchase) plans to customers. This was the initial catalyst for Mis Sold Car Finance Claims, which are becoming more popular with consumers, driven by the growth in online marketing of mis sold car finance claims by law firms and CMCs.
The FCA Review into Mis Sold Car Finance reports that:
“Commission arrangements are operating in motor car finance may be leading to consumer harm on a potentially significant scale”, thus enabling Mis Sold Car Finance Claims.
“Some customers are paying much more for their motor car finance because of the way lenders choose to pay their brokers”
“Of the firms in the FCA analysis (around 60% of the market) they estimate that commission models which allow broker discretion over the interest rate [payable by the customer] could be costing customers £300m more annually when compared against a baseline of Flat Fee models”;
“The FCA estimate that on a usual motor car finance agreement of £10,000, higher broker commission under the Reducing DiC model can result in the customer paying around £1,100 more in interest charges over the four-year term of the agreement.”
Mis Sold Car Finance Claims are based on the fact that:
Large parts of the motor car finance sector had commission models in which brokers and finance intermediaries were paid proportionately to the rates of interest paid by customers;
As those rates were in many cases being set (within parameters) by the brokers/finance intermediaries there was a significant incentive to increase the interest rates being offered to customers;
As statistical analysis confirms, the interest rates charged to customers were much higher than can be justified by (for example) differential risk reflected by credit scores. All these ideas lead to the conclusion that car finance claims are viable against the dealer or lenders.
Can I make a Mis Sold Car Finance Claim for compensation?
Did you enter into a Car Finance PCP Agreement? If so, you may have been overcharged by the lender.
Car Finance PCPs are simply interest-only loans, and the interest can be more expensive than planned.
If you think that your Car Finance deal wasn’t explained very well when you agreed to buy the car, then this may indicate there are grounds for making a Mis Sold Car Finance claim.
The following is a list of circumstances that may suggest you were mis sold and should look into a potential Mis Sold Car Finance Claim in more depth.
The car showroom salesman didn’t explain the car finance deal to you well enough
The salesman didn’t explain the interest charges well enough for you to fully understand
The car dealership did not outline who ultimately owns the car (.e.g. not you)
It was not made clear that you had to pay for any repairs to the car, or wear and tear costs
You weren’t presented with any alternative finance options for buying your car