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  • Writer's pictureMis-sold Car Finance 2024

Mis-sold Car Finance. Millions Of Drivers Could Potentially Be Affected.

Millions of drivers in the UK could potentially be affected by mis-sold car finance.

The Financial Conduct Authority (FCA) has launched an investigation into whether consumers were unfairly charged inflated prices for loans on new and secondhand cars. This sector, which accounts for a staggering £50 billion annually, involves various types of finance agreements, including personal contract purchase (PCP) plans and hire purchase (HP).

Here are some key points:

  1. Scale: In recent years, 80% to 90% of new cars and an increasing number of used vehicles have been purchased through finance agreements.

  2. Complaints Surge: After the FCA tightened regulations on car dealers and brokers’ commission practices, consumer complaints surged. The ban on agreements where firms received commission linked to customers’ interest rates led to concerns about overcharging.

  3. Potential Payouts: The investigation could result in a compensation scheme for those who were victims of large-scale mis-selling. Experts compare this situation to the infamous PPI (payment protection insurance) scandal.

  4. High Number of Complaints: Many consumers who took out car finance before the ban believed they were being charged excessively. While most of these complaints were initially rejected by companies, recent rulings by the Financial Ombudsman Service have favored complainants.

  5. FCA’s Role: The FCA aims to identify widespread misconduct and ensure that those owed compensation receive a fair settlement.

If you suspect you’ve been mis-sold car finance, contact Claimline Legal UK right now. We are representing people who believe they have been mis-sold car finance in the UK. Register now in case a deadline is enforced!

Over 14 years in successful financial claims. Get free advice. No upfront fees. No win no fee*. And a fixed and capped final fee tariff.

Understanding Mis-Sold Car Finance.

Mis-sold car finance refers to situations where consumers are provided with inaccurate or misleading information during their car finance agreements. These mis-selling practices can have serious consequences for borrowers, leading to financial losses and disputes. In this guide, we’ll explore common examples of mis-selling, signs to watch out for, and steps you can take if you suspect you’ve been a victim of mis-sold car finance.

  1. Undisclosed Fees: Some lenders fail to disclose additional fees associated with car finance agreements. Borrowers may discover unexpected charges after signing the contract.

  2. Unsuitable Terms: Car finance packages should be tailored to an individual’s financial circumstances. Mis-selling occurs when borrowers are offered terms that don’t align with their needs or financial situation.

  3. Inflated Interest Rates: Lenders may charge higher interest rates than necessary, resulting in borrowers paying more over the loan term.

  4. Failure to Disclose Important Details: Vital information, such as penalties for early repayment or hidden costs, should be clearly communicated. Mis-selling occurs when these details are omitted.

  5. Negligent Advice: Borrowers should receive accurate advice about car loan alternatives. Mis-selling occurs when lenders provide bad or negligent advice.

  6. Commission-Driven Sales: Car dealers and finance providers may earn commissions based on the sale of the vehicle. If borrowers aren’t informed about these commissions, it can lead to mis-selling.

Signs You Were Mis-Sold Car Finance

If you suspect that your car finance deal was mis-sold, consider the following signs:

  1. Commission Disclosure: The car dealer didn’t fully explain that they would receive a commission on the sale.

  2. Unclear Interest Rates: The commission and interest rates weren’t clearly explained during the negotiation. This is what the FCA is currently investigating. Dealerships and lenders used a system called “Discretionary Commissions”. This allowed them to inflate the interest rate on car loans offering higher commissions to the sales persons. With historically low interest rates some people were paying 9%, 10%, 11% or more.

  3. Lack of Transparency: The car finance agreement contract or terms and conditions weren’t adequately disclosed.

  4. Unrealistic Payments: If the Personal Contract Purchase (PCP) payments seem unrealistic or unaffordable, it could be a sign of mis-selling.

  5. No Credit Checks: If no finance credit checks were conducted, it raises concerns about responsible lending.

  6. Pressure Tactics: Feeling pressured into the deal without being presented with alternative options.

Taking Action.

If you believe you’ve been mis-sold car finance, take the following steps:

  1. Gather Evidence: Collect all relevant documents, including the car finance agreement, terms, and any correspondence.

  2. Contact Claimline Legal UK: 0800 779 7457. We will give you free advice and outline your options.

Remember that mis-sold car finance can have significant financial implications. Stay informed, seek assistance, and take action if you suspect you’ve been a victim of mis-selling.

Personal Contract Purchase (PCP) is a type of car finance that allows you to drive a car for a set period without needing to buy it outright. Here’s how it works:

  1. Agreed Term: You become the registered keeper of the car and make monthly payments to the finance provider. During this agreed term (typically between three and five years), you enjoy the use of the car.

  2. Deposit: When you opt for PCP car finance, you’ll be asked to put down a deposit on the vehicle. Usually, this deposit is around 10% of the car’s value, but it can vary depending on the provider.

  3. Monthly Payments: Over the agreed period, you’ll make regular monthly payments. However, unlike hire purchase (HP), these payments won’t cover the total cost of the car. Instead, they account for the estimated depreciation of the vehicle during the contract.

  4. Guaranteed Minimum Future Value (GMFV): When you take out PCP finance, the provider estimates what your car will be worth at the end of the contract. This value is known as the GMFV. Your repayments are calculated based on the difference between the current value of the car and the GMFV.

  5. Balloon Payment: At the end of the PCP agreement, you have three options:

  • Return the Car: You can return the car to the dealer.

  • Exchange for a New Car: You can exchange it for a new car and enter into a new finance agreement.

  • Keep the Car: If you want to keep the car, you pay a lump sum known as the balloon payment. This amount is based on the GMFV and allows you to take ownership of the vehicle.

Remember that PCP can be more complex than other forms of car finance, so understanding the terms and options is essential when considering it as an option for purchasing a new car.

Personal Contract Purchase (PCP) and other car finance options have distinct features. Let’s explore the differences:

  1. PCP (Personal Contract Purchase):

  • Monthly Payments: PCP divides the total amount borrowed into smaller monthly payments, covering the car’s depreciation rather than the entire price.

  • Balloon Payment: At the end of the agreement, a larger payment (the balloon payment or Minimum Guaranteed Future Value) is due.

  • Flexibility: PCP offers flexibility. You have three options at the end:

  • Pay the balloon payment and keep the car.

  • Return the car and walk away.

  • Use the difference between the car’s value and the balloon payment as a deposit for a new car.

  • Appeal: PCP appeals to those who prefer lower monthly costs and the option to change cars frequently.

  1. HP (Hire Purchase):

  • Equal Monthly Payments: HP divides the total amount borrowed into equal monthly payments over a fixed term (usually 3-4 years).

  • Ownership: You own the car from the start.

  • No Balloon Payment: There’s no large final payment; you pay off the entire loan during the term.

  • Suitable for: HP suits those who want outright ownership and predictable payments.

  1. Bank Loans:

  • Monthly Installments: Bank loans involve fixed monthly installments covering the entire car price.

  • Ownership: You own the car immediately.

  • Interest: Interest rates may vary based on your creditworthiness.

  • Suitable for: Bank loans are straightforward and suit those who want full ownership without balloon payments.

  1. Leasing (PCH):

  • Monthly Rentals: Personal Contract Hire (PCH) involves monthly rentals without ownership.

  • No Ownership: You return the car at the end of the lease.

  • Fixed Term: Leases typically last 2-4 years.

  • Suitable for: PCH is for those who prioritize low monthly costs and don’t need ownership.

In summary, car financing can be a tricky business and mis-selling of car finance could be as big as PPI.

If you think you have been mis-sold a car finance agreement, contact Claimline Legal UK for free advice now.

Claimline Legal UK is UK owned and UK based, You will never be passed to an overseas call centre Over 14 years in successful financial claims.

·         No upfront fees

·         No win no fee*

·         We operate a capped fee policy

0800 779 7457



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