What is mis sold car finance?

Mis-sold car finance claims cases are soaring, when buying a new or used car, it is becoming more and more common to use a car finance agreement to purchase a vehicle. Usually, the consumer chooses a vehicle at a car dealership, the dealership then sells the car to a finance provider meaning the finance provider owns the car. In return for the consumer making monthly payments the consumer is then allowed to use the car, for the most part the consumer buys the car with a ‘balloon payment’ at the end of the agreement or can return it (however, this depends on the type of finance agreement).

There are different types of car finance, such as PCP (Personal Contract Purchase), HP (Hire Purchase), Car leasing or a personal loan straight from the bank and financing through the dealer. PCP is the most common of these and the one that commissions tend to be hidden from the consumer on.

There are sneaky tactics being used, hiding commission and car salespeople have been doing this to gain better and higher rates of commission which has led to buyers being conned out and paying more than is fair. The Financial Conduct Authority recently banned these commissions throughout all the dealerships in the UK, which had led to an influx of mis sold car finance claims. It was found that salespeople were allowed to dictate the rate of interest, meaning the higher the interest rate charged the higher the amount of commission they were receiving.

You can claim back money under a similar type of agreement to PPI claims under the ‘Plevin’ ruling, which applies to consumers paying unfair amounts of commission or hidden commission.

What are the different types of car finance?

Personal Contract Purchase (PCP)

The buyer makes a down payment and then agrees a contract to pay the balance plus fees and interest, this is paid in monthly instalments. When the contract comes to an end (usually between 2-4 years), the buyer has the option to purchase the vehicle for an agreed price at the end of the agreement they can make a final payment (sometimes known as a balloon payment or guaranteed minimum future value) or they can return the vehicle and owe nothing.

Hire Purchase (HP)

Hire purchase is an agreement between a dealership and buyer where the buyer pays a down payment, which can be made in monthly payments. The buyer then hires the car from the dealership for the period of the contract that was agreed. However, the vehicle is still the property of the dealership over the duration of the contract.

Car Leasing (PCH)

This type of finance enables you to hire a car for an initial period, with an option to purchase the vehicle at the end. It allows for flexibility because you can change your mind about buying at the end. The length of the is hire is between 2-3 years, you can also agree to carry on the hire however, this usually comes with a slight increase in price for the hire.

Personal Loan

These loans function like normal loans, they are paid back in monthly instalments with interest calculated every month. There are two types of loans, repayment loans or interest-only repayment loans. Repayment loans function like regular loans they are paid back in monthly instalments with interest calculated every month. Interest-only repayment personal loan, you only must repay the lender in monthly instalments until your term is up.

How could I have been mis sold car finance?

PCP deals are the most common mis sold car finance deals that are sold, so if you have taken out PCP on a vehicle, its likely you could make a claim. If a finance company has failed to mention the salespersons commission that will have been part of the PCP car finance agreement you will have signed, this means there would be a good chance you could be eligible to make a PCP claim.

A salesperson can also mis-represent the level of APR (Annual Percentage Rate), not fully explaining the car finance agreement, misusing credit checking facility, not disclosing hidden commission and the T&C’s. Any of these would be classed as mis-selling.

Other types of car mis-selling complaints include:

• Being sold a car that is faulty or of unsatisfactory quality,
• You as a consumer are facing financial difficulties so would like to exit your car finance agreement early,
• Unaffordable finance agreements, or they weren’t treated fairly when they were in financial difficulty,
• Being overcharged or feel they have been unfairly charged at the end of the agreement on things like excess mileage or damage charges,
• Excess mileage charges, whether you didn’t know there was an annual mileage cap or if you believe the charges are unfair,
• Damage charges, usually each individual damage charge is looked at whether it was fair and reasonable for the finance provider to apply it.

What do I do if I was mis sold Car finance?

90% of new vehicles are bought under PCP, in turn mis-selling is becoming more and more prevalent. It is an easy way for salespeople to make money as they gain commission on the agreement, on average this is usually in the region of £400-£800 per purchase.

If you believe you have been mis sold a car on finance the first thing you should do is complain to the dealership who dealt with your car finance deal. If you feel they haven’t dealt with your complaint properly or they won’t help you at all then after 8 weeks you should request all your PCP paperwork that relates to your car finance agreement and the Financial Ombudsman service can help you with a ‘non-compliance’ claim.

Alternatively, you can use a claims management company that can help handle your mis sold car finance claim. If you were made aware of all the aspects of the agreement such as the high risks and all the payments that you needed to make, then unfortunately you are not suitable for compensation.

What happens if you were mis sold car finance?

If it turns out that you were mis sold car finance deal, Courmacs Legal Ltd. will consider the impact this has had on you.

We will try have some or all the charges from the agreement written off, if we believe they were not properly brought to your attention when purchasing the car.

Or end the agreement and have the car taken back if you think you wouldn’t have gone through with the transaction if you knew about the hidden aspect of the contract or if we feel it would be unreasonable for you to continue with the agreement. There could also be grounds for compensation if you feel you have been caused distress and inconvenience, you can begin your claim by contacting us on our website and you can see the other claims we deal with.