Understanding PCP Car Finance Claims
Personal Contract Purchase (PCP) is a popular car finance option in the UK that allows individuals to drive a new or nearly-new car without having to buy it outright. While PCP offers flexibility and lower monthly payments compared to traditional car loans, it also comes with its own set of potential pitfalls, leading some consumers to file claims.
Under a PCP agreement, the customer pays an initial deposit followed by monthly instalments for an agreed period, typically two to four years. At the end of the term, the customer has three options:
Return the car to the dealer.
Pay a balloon payment to own the car.
Trade the car in for a new one under a new PCP agreement.
Common issues that lead to PCP claims include:
Misrepresentation of the terms and conditions by the dealer.
Unfair charges or penalties.
Hidden fees.
Disputes over the car’s condition and mileage at the end of the agreement.
Consumers who believe they have been misled or unfairly treated under their PCP agreement can pursue a claim. This may involve reviewing the agreement documents, gathering evidence of any misrepresentations or unfair practices, and potentially seeking legal advice.
Understanding PCP car finance claims can help consumers protect their rights and seek redress if they encounter issues with their agreements.
Have you purchased a vehicle on finance between April 2007 and January 2021?
In 2021, a Financial Conduct Authority (FCA) investigation discovered widespread mis-selling of car finance agreements.
Over one million have submitted their claims. Don’t miss out and check your agreements now!
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Over 30 Million PCP agreements expected to qualify for compensation
The outcome of a major investigation into hidden, unfair car finance commission will be pushed back from September 2024 to May 2025, it’s been announced.
The regulator behind the probe has told MoneySavingExpert.com founder Martin Lewis that payouts to drivers are now “more likely”.
How to tell if you've been mis-sold car finance and what you can do about it
Last year, the FCA announced a review into whether motor finance customers had been overcharged because of past use of discretionary commission arrangements.
Some dealers or brokers earned a better rate of commission if car buyers were placed on higher interest rates.
In a recent Court of Appeal case, three people claimed they hadn’t been aware of this when they purchased their vehicles.
The car finance scandal - what exactly happened?
When you buy a car on finance, you are effectively loaned the money, which you pay off in monthly instalments. These loans carry interest, organised by the brokers (the people who sell you the finance plan).
These brokers earn money in the form of a commission (which is a percentage of the interest payments).
Before January 2021, some car finance lenders had what was called a “discretionary commission arrangement” (DCA) with brokers.
Under these arrangements, brokers earned more commission if buyers were put onto a higher interest rate – this incentivised sellers to maximise interest rates, which meant many were unfairly charged too much.
The Financial Conduct Authority (FCA) banned this practice in 2021, but a high number of consumers have complained they were overcharged before the ban came into place. The Financial Ombudsman Service (FOS) has 20,000 open complaints they are dealing with.
What is the investigation?
In January 2024, the FCA announced a review into whether motor finance customers had been overcharged because of past use of DCAs. They paused the eight-week deadline for firms to respond to complaints and are now assessing thousands of records spanning 14 years.
The FCA is using powers under the Financial Services and Markets Act 2000 to review historical motor finance commission arrangements across multiple firms – all of whom deny they have acted inappropriately.
The FCA is now looking into a “consumer redress scheme” to see if this is a better way of compensating people en masse.
How to tell if you have been affected
Motor finance serves over two million consumers a year, and the FCA says you may have been affected if you:
- Bought a car under a finance scheme before 28 January 2021
- There was a discretionary commission arrangement between your lender and broker.
Firms involved include: Barclays, Santander, Close Brothers and Lloyds Banking Group (which organises loans through its Black Horse finance arm – and also happens to be the UK’s largest motor finance provider).
These lenders have been warned to set aside money to deal with claims.