Car Finance Claims

Introduction to car finance: HP and PCP explained

Car finance is a common route for many UK consumers looking to fund the purchase of a new or used vehicle. While paying in full upfront might be ideal, it isn’t always feasible for every budget. This reality has led to the popularity of finance products such as Hire Purchase (HP) and Personal Contract Purchase (PCP). Each finance option can be suitable for different individuals, but it’s important to understand exactly how they work and what you may be committing to when you sign on the dotted line.

Car finance, in essence, allows you to spread the cost of a vehicle over an agreed period. However, knowing the details of HP and PCP, and how they differ, is essential in avoiding potential pitfalls. For instance, PCP arrangements often feature a final, larger balloon payment and a mileage cap, while HP agreements can affect outright ownership of the car from start to finish in varying ways. These nuances can have a significant bearing on whether a finance arrangement remains suitable for your needs.

What is Hire Purchase (HP)?

Hire Purchase (HP) is a finance arrangement where you usually pay a deposit—often around 10% of the car’s value—followed by fixed monthly payments spread over a set term. Until the final payment is made, the vehicle legally remains the property of the finance company. Once all payments are completed, ownership transfers to you. This structure tends to suit individuals who prefer a straightforward path to ownership without the need for large final payments.

Common features of HP include:

• Fixed monthly payments over an agreed term (commonly between 2–5 years).

• Lower initial deposit compared to some standard loans.

• Ownership is only secured once all payments, including any fees, are made.

Advantages of HP can include ease of budgeting, as payments are consistent. Disadvantages might be higher monthly costs when compared to PCP, since the vehicle’s entire value is typically financed from the outset.

What is Personal Contract Purchase (PCP)?

Personal Contract Purchase (PCP) is similar to HP in that it involves an initial deposit and subsequent monthly payments. However, you do not repay the entire cost of the car through these instalments. Instead, the monthly payments cover the car’s depreciation during the term. A deferred balloon payment—sometimes known as the Guaranteed Future Value (GFV)—is due at the end if you wish to own the vehicle outright.

PCP can be appealing if you like to switch cars regularly or want flexibility at the end of the agreement. You can:

1. Pay the final sum to take ownership.

2. Hand the car back with no further obligations, subject to mileage and condition.

3. Part-exchange the vehicle for a new finance deal, using any equity as a deposit.

Key differences between HP and PCP

Potential pitfalls and the relevance to claims

While both HP and PCP have their merits, they can also lead to disputes or claims if the agreement terms are misrepresented, if the vehicle is faulty, or if the finance arrangement becomes financially burdensome. The competition for new customers has grown fierce, and some providers may push deals that come with hidden costs or unclear obligations. Understanding these nuances is a critical first step to safeguarding your rights.

This high proportion means there is a growing focus on how car finance deals are marketed, structured, and managed. Complaints about the fairness of agreements, undisclosed fees, or even unscrupulous dealership practices can create grounds for a valid claim.

In summary, understanding the fundamentals of HP and PCP is essential before delving into more complex considerations such as claims and legal rights. Each has distinctive terms, with differing financial commitments and end-of-term outcomes. Taking time to reflect on your long-term plans for ownership, how much you can afford monthly, and whether you anticipate changing cars in the near future will help you decide which arrangement, if any, is appropriate.

Understanding your rights when making a claim

Whenever you enter into a car finance agreement, you enjoy certain legal protections designed to ensure fairness, transparency, and accountability. These legal frameworks can be decisive if you believe you have grounds for a claim—whether it’s related to mis-sold finance, problems with the vehicle, or disputes over the terms of the contract. Knowing your rights fully can offer both emotional reassurance and practical empowerment if an issue arises.

Car finance, in the UK context, typically comes under the Consumer Credit Act (CCA) 1974 (amended in 2006), which provides core protection for borrowers. This legislation requires finance lenders and dealerships to implement fair terms, spacing out information so borrowers can understand annual percentage rates (APR), total repayable amounts, and other critical contract details. If you believe any part of your agreement was misrepresented or unclear, the CCA may offer grounds for a valid claim.

Key rights under the Consumer Credit Act

1. Right to clear contractual information: Lenders must provide you with a breakdown of costs, including APR, total interest payable, and fees.

2. Right to withdraw: You can usually withdraw from the finance agreement within 14 days of signing (cooling-off period), paying back only the capital and any accrued interest.

3. Section 75 protection: If the car costs between £100 and £30,000, and the finance agreement is covered under certain criteria, you have parallel liability protection. This means you could potentially claim against the lender for a breach of contract by the dealership.

4. Right to early settlement: You can repay the agreement early, though you may incur an early settlement fee.

5. Right to voluntary termination: Under Section 99 of the CCA, if you have paid at least 50% of the total amount payable, you can end the agreement and return the vehicle.

Additional consumer rights

In addition to statutory protections under the CCA, you have broader consumer rights enshrined in legislation such as the Consumer Rights Act 2015. This Act can support you if the vehicle is not of satisfactory quality, not fit for its intended purpose, or does not match any description provided at point of sale.

This can be particularly relevant if the car you financed develops serious faults soon after purchase. Having a record of any diagnosis, repair attempts, and communication with the dealership or lender serves as crucial evidence in substantiating a claim.

The role of regulatory bodies

Organisations like the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) help enforce fair practices and resolve disputes. The FCA sets rules for lenders and can penalise those that breach regulations, while the FOS can adjudicate individual complaints free of charge to the consumer.

Knowing these rights and avenues of redress provides a solid foundation if you need to pursue a claim. When in doubt, reviewing your agreement documents thoroughly and seeking tailored advice can save time and frustration. Keep accurate records of all relevant paperwork, as well as any communication that could support your case should you escalate matters.

Common reasons for claims involving car finance

Car finance claims can arise from a wide spectrum of issues, some of which are more straightforward, while others can be quite complex. Recognising these common grounds is the first step in determining if your concern might progress into a formal complaint or legal claim. Whether you are dealing with an unresponsive dealership, suspecting misrepresentation of a loan agreement, or facing unexpected fees and penalties, your next steps often hinge on identifying the precise nature of the problem.

Mis-sold finance agreements

One of the most frequent bases for claims is mis-selling. This can appear in various forms:

• Undisclosed commission: Some dealerships earn commission from lenders. If they fail to disclose this or if the commission arrangement influenced the finance deal’s suitability for you, it may constitute grounds for a claim.

• Inaccurate interest rates: If the annual percentage rate (APR) you agreed to was misrepresented or if additional fees were hidden in the monthly payment calculation.

• Misleading end-of-term obligations: Particularly relevant in PCP agreements if the final balloon payment or mileage restrictions weren’t fully explained.

Faulty vehicles and breach of contract

Another major cause for finance-related disputes centres on issues with the vehicle itself. For instance, your car might be mechanically unsound, or it could have pre-existing faults that were not disclosed at the time of sale. Under the Consumer Rights Act 2015, the vehicle must be of satisfactory quality and fit for purpose. If these conditions aren’t met, you may have a breach of contract claim that puts you in a position to seek refunds, repairs, or replacements.

Unclear or unfair contract terms

Some finance agreements contain complicated clauses that can be easily misunderstood. These might include:

• Excessive early repayment fees

• Ambiguous total payable amounts

• Vague obligations around upkeep or servicing

Inadequate affordability checks

There has been an increasing focus on whether finance providers conduct robust affordability checks. If a lender grants credit to an individual for whom the payments are clearly unsustainable, the borrower may later claim irresponsible lending. In these scenarios, the burden of proof can be on the finance provider to show they followed appropriate due diligence.

Typical triggers for car finance claims

The precise outcome of any claim will depend on multiple factors, including the evidence available and timeliness of your complaint. Staying organised and documenting every step ensures you’re in the strongest possible position if a dispute arises.

How to check if you have a valid claim

Determining the validity of a claim involves gathering evidence, reviewing all relevant documents, and objectively assessing if the circumstances meet legal or regulatory thresholds. In many cases, your “gut feeling” that something wasn’t right can be a good starting point, but objective proof is crucial for successful resolution. A structured approach will help prevent misunderstandings and strengthen your position.

Evaluate your agreement and supporting documents

Begin by carefully reading through your finance agreement and any supporting documents, including promotional materials, emails from the dealership, and records of phone calls. If initial estimations of interest rates differ from what appears in your final documents, this discrepancy can be a red flag. Similarly, if sales staff made verbal promises about service packages or guaranteed buy-back terms, check if these are reflected in your signed contract.

Look for:

• Details of any commission the dealership earned from the finance provider.

• Breakdown of the total interest payable and the overall cost of credit.

• Key statements about the vehicle’s condition or obligations such as annual servicing.

Seek professional assessments (if relevant)

If your claim relates to a faulty vehicle, having an independent mechanic assess its condition can be invaluable. Their report could serve as evidence that the car was not of satisfactory quality at the time of purchase. Ensure that you keep any repair bills, quotes, or part replacement invoices, as they help illustrate the scale of the fault and the financial impact on you.

Review communications for mis-selling or misrepresentation

Check all emails and conversations for any statements that might indicate a mis-sold deal. For instance:

• Were you explicitly told that a particular finance option was “the only viable choice” when others existed?

• Did the salesperson downplay final balloon payments or early termination fees?

Use a checklist of potential claim indicators

It may be useful to create a personal checklist to see if your concern matches common claim indicators:

• Indicator 1: The interest rate in your contract is different from what you were quoted initially.

• Indicator 2: You discovered the dealership or salesperson received a commission that wasn’t disclosed.

• Indicator 3: The vehicle has significant mechanical issues soon after purchase.

• Indicator 4: The finance provider failed to conduct an affordability check.

• Indicator 5: Contradictory or confusing terms regarding mileage restrictions in PCP deals.

If multiple boxes are ticked, it increases the likelihood that you have grounds for a valid claim.

Consider the timeliness of your complaint

Remember that claims have time limitations. Under certain laws and regulations, you may be required to file within specific time frames—commonly six years from the date of the agreement or when the issue was discovered. Being aware of these deadlines is critical in ensuring your complaint is considered.

By systematically evaluating your situation against these criteria, you can gauge whether pursuing a claim is worthwhile. If your issue appears to meet regulatory conditions for complaint, the next step is to gather all your evidence and approach the finance provider or relevant body for a resolution.

The claims process step-by-step

Once you’ve identified that you have grounds for a claim, understanding each stage of the process will help you approach it confidently and efficiently. While no two claims are identical, a general framework exists that can guide you through from initial evaluation to final resolution.

Step 1: Gather your documentation

Start by collecting everything you might need to support your claim:

• Finance agreement: Original contract, terms, and any supplementary documents.

• Proof of payments: Bank statements or receipts showing that you’ve been making payments on time or indicating any unexpected fees.

• Vehicle condition reports: If faults are involved, documentation or independent mechanic assessments demonstrating the nature and extent of the issue.

• Emails and written communication: This includes any messages from the dealership or finance provider regarding your agreement, repairs, or questions about your contract.

Step 2: Contact your finance provider or dealership

In the UK, the first port of call is often the finance provider itself (rather than the dealership) because they are ultimately responsible for the agreement. Submit a formal complaint in writing:

1. Clearly outline the issue and why you believe a breach of contract has occurred.

2. Attach copies of relevant evidence.

3. Specify your desired outcome, such as a refund, repair, or contract termination.

Use polite but firm language. If the finance provider is regulated by the FCA, they must acknowledge receipt of your complaint and investigate it following a given timeline—usually up to eight weeks for a final response.

Step 3: Approach the Financial Ombudsman Service (FOS)

If your finance provider fails to resolve your complaint satisfactorily, or if they exceed the eight-week window without a final resolution, you can escalate the matter to the FOS. This service is free of charge and is designed to deliver independent adjudication. You will typically need to present the same evidence to the FOS, along with any additional correspondence you have received from the finance company.

Step 4: Potential legal proceedings

For more complex or high-value claims, you may consider escalating the complaint to a solicitor for legal redress. This can take place through the county courts, but it often involves costs that can be partially recouped if you win your case. Legal proceedings can be more time-consuming, so it’s vital to have robust evidence and a clear argument as to why the contract was breached or mis-sold.

Step 5: Negotiation and settlement options

Sometimes, a finance provider may propose a settlement to avoid negative publicity or additional costs. This could involve reducing the amount owed, adjusting the interest rate, or offering a partial refund. Before accepting, ensure the terms are in your best interest and that they adequately address the core issues of your claim.

Simplified overview of claim escalation

By following this structured route, you stand the best chance of a favourable outcome. Keep track of deadlines and remain proactive in supplying any additional documents or clarifications requested. Patience and persistence are often needed, but a clear approach can substantially increase your odds of success.

What happens to your finance agreement during a claim

When you start a dispute or claim related to your car finance, it’s important to understand what happens to the agreement itself. In some instances, it might be put on hold or paused, but in others, you may still be obligated to make payments until a final resolution is reached. This uncertainty can feel stressful, but having a clear picture of the possible scenarios can help you plan and avoid damaging your credit standing.

Payment obligations during the claims process

In most cases, the finance agreement remains in force unless it is lawfully terminated. If you stop paying prematurely without an agreement from the finance company, you risk accruing late payment fees or negatively impacting your credit score. Even if you feel strongly that you have been mis-sold the deal or the car is faulty, you should continue making payments while the claim is under review.

However, some lenders will allow a short payment holiday or arrange a temporary pause if there is compelling evidence of a major issue. Such concessions are not guaranteed and often depend on the nature of the dispute. Always get written confirmation from the finance provider if they agree to suspend or alter payments; a verbal agreement is not sufficient.

Temporary vehicle usage

If your dispute concerns the car’s roadworthiness or quality, you might be uncertain whether to continue using it. In some situations, a mechanic or the finance provider may advise ceasing usage to avoid further damage or to keep mileage within PCP limits if a repair or replacement is pending. If you decide (or are instructed) not to drive the car, store it securely and retain a record of any storage costs, which might be relevant in your claim.

Voluntary termination or early settlement

Some claimants opt for voluntary termination under Section 99 of the Consumer Credit Act if they have paid at least 50% of the total amount payable. This can be a strategic way to exit the agreement if the car is faulty or if you no longer wish to remain bound by the terms. Alternatively, you might consider an early settlement if the issue isn’t so severe as to warrant termination but you’d rather pay off the balance and move on. Both options come with their own implications in ongoing claims, and it’s wise to seek advice beforehand.

Negotiating with the finance provider

During a dispute, you may engage in continuous discussions with the lender. They may offer:

• Repairs or replacements for faulty vehicles.

• Reduction in the amount owed if they accept partial responsibility for mis-selling.

• Temporary suspension of payments or altered payment terms.

Carefully assess any offer before accepting; once you agree to a settlement, it might limit your ability to pursue further action.

Potential outcomes

In straightforward claims, the finance provider might rectify the issue quickly—especially if they acknowledge a clear error. In more complex cases, you could reach an impasse, forcing escalation to the Financial Ombudsman Service or legal channels. Throughout these negotiations, the original finance agreement typically remains valid until officially changed or terminated by mutual consent or adjudication.

Keeping up with payments and responsibly engaging in any negotiated solutions can mitigate financial risk. Doing so also underscores your commitment to a full, fair resolution, thereby strengthening your position whether the dispute remains in-house or progresses to an external authority.

Dealing with the finance provider and dealership

Your experience when making a claim often involves navigating two key relationships: the finance provider and the dealership. Although the finance provider underwrites or arranges your finance agreement, the dealership is often the direct seller of the vehicle. Knowing how to interact effectively with both can streamline the claims process, reduce stress, and potentially hasten a favourable outcome.

Identifying who is responsible

Although the dealership may have sold you the vehicle, legal responsibility in finance arrangements often falls primarily on the lender, because they technically own the vehicle until you’ve fulfilled your payments (especially in HP agreements). The dealership may be liable if they misrepresented the car’s condition or withheld crucial details, but any claim typically starts with a formal complaint to the finance provider.

Communicating with the finance provider

When it comes to official communication:

1. Document everything: Keep copies of every letter, email, or note about phone conversations.

2. Be concise but detailed: Outline your complaint methodically, citing relevant clauses of your finance agreement or legislation if applicable.

3. Stay patient but persistent: Finance providers have set timescales (often up to eight weeks) to respond definitively to a complaint.

While some providers offer phone-based customer service, it is generally better to submit your complaint in writing so you have a verifiable record. If you’re not satisfied with their initial response, escalate the complaint by following the provider’s set complaint procedure.

Working with the dealership

Even once your formal complaint is with the finance provider, the dealership might be involved in:

• Assessing vehicle faults

• Providing repair estimates

• Exchanging the car or offering a new deal

Cooperative dealerships may offer immediate remedies, such as repairs at no cost if a fault is confirmed. However, be cautious not to sign any settlement offered by the dealership without consulting your finance provider, as it could affect your official claim.

Communication tips for dealing with providers and dealerships

Escalating if communication breaks down

If the finance provider does not address your concerns adequately, or if the dealership refuses to cooperate, you may:

• File a complaint with the Financial Ombudsman Service.

• Consult a solicitor specialising in consumer law.

• Use alternative dispute resolution (ADR) schemes if applicable.

Resolving issues from both sides—finance and dealership—can shorten the claims process. In simpler cases, open dialogue and willingness to compromise can lead to quick outcomes. However, ensure that any agreement truly resolves your concerns and is documented in writing, preventing future disagreements. Remaining calm, polite, and focused on the facts can significantly improve your chances of a constructive resolution.

Resolving disputes and complaints effectively

When disagreements escalate into formal disputes, it’s vital to have a clear plan on how to assert your rights whilst maintaining a composed approach. Emotions can run high—especially if you’re dealing with faulty cars or misleading financial terms—but a structured response is often the difference between a messy, prolonged conflict and a timely resolution.

Start with the provider’s official complaints procedure

All FCA-regulated firms, including finance companies, must have a documented complaints procedure. Whether your complaint is about the car’s condition or suspicious finance terms, begin by following this procedure. You will typically submit:

• A detailed letter or email outlining your specific concerns.

• Evidence in the form of bills, inspection reports, or relevant contract sections.

• A request for specific actions (refund, repair, compensation).

Providers usually aim to issue a “final response” within eight weeks. Delays are possible, but they must inform you if they need more time.

Consider mediation and ADR services

In some sectors, Alternative Dispute Resolution (ADR) schemes act as neutral mediators to help both parties reach an amicable solution. This can prevent the need for a formal legal claim. ADR can be faster and often less adversarial:

• Mediation: A neutral mediator helps focus the discussion and encourages compromise.

• Arbitration: An arbitrator, akin to a private judge, makes a binding decision that both parties must follow.

Escalation to the Financial Ombudsman Service (FOS)

If you reach a deadlock with the finance provider—for instance, if they reject your complaint or fail to respond adequately—you can take your case to the FOS. During this process:

1. Obtain the ‘final response’ from the finance provider.

2. Complete an FOS complaint form, attaching copies of all your documents.

3. Cooperate fully with any FOS investigation, answering queries or requests promptly.

If the FOS upholds your complaint, the finance provider must typically comply with the decision. Compensation or remedial measures might be mandated. However, if either party disputes the FOS ruling, the next step could involve more formal legal action.

Managing persistent disagreement

If efforts at negotiation, ADR, and the FOS fail to bring resolution, legal proceedings may be the remaining option. This path can be time-consuming and potentially costly, so weigh its merits carefully. Court action suits serious breaches—such as large financial losses from misrepresentation or protracted damage that significantly impacts your finances.

Dispute resolution timeline

A typical timeline might look like this:

1. Complaint lodged with the finance provider.

2. Await final response (up to eight weeks).

3. Escalate to FOS if unresolved.

4. FOS decision (may take several months).

5. Optional court action if still unsatisfied.

By adhering to these steps, you give your dispute the best chance of an early and fair resolution. Staying well-organised and professional in your communication goes a long way towards ensuring your arguments are taken seriously. Above all, be sure to keep copies of everything, from the first letter of complaint to the final correspondence.

Legal options and escalation routes available

While most car finance disputes are settled directly with the lender or through the Financial Ombudsman Service, more serious or complex cases might demand legal intervention. Understanding the potential legal routes ensures you’re aware of your rights and possible courses of action should you be unable to reach a satisfactory settlement through informal or ombudsman channels.

When to consider legal action

Legal action tends to be a last resort. It’s usually warranted when:

• You have suffered substantial financial loss or emotional distress due to alleged misrepresentation.

• The finance provider fails to engage with the complaint or ombudsman process in good faith.

• You strongly believe the dispute revolves around a significant breach of contract or negligence.

Before you proceed, gather comprehensive evidence and, if possible, consult a solicitor specialising in consumer or finance law. They can offer an objective opinion on the strength of your case and potential costs involved.

Small claims court versus higher courts

For claims in England and Wales that are typically valued up to £10,000, the Small Claims Court can be a suitable platform. This process aims to be more accessible and less formal than higher courts. In Scotland, the equivalent route is the Simple Procedure for claims up to £5,000. Higher-value disputes, or those involving complex legal points, may be heard in the county courts or Court of Session in Scotland.

Solicitors and legal fees

In some instances, you may hire a solicitor on a “no win, no fee” (conditional fee) basis, though this is less common for consumer credit disputes compared to personal injury claims. Alternatively, you could pay an hourly rate or a fixed fee. Ensure you clarify the fee structure before proceeding, and weigh whether the likely compensation outweighs potential legal costs. Some people opt for legal expenses cover if they have it through home insurance or other policies.

Court outcomes and enforcement

If you succeed in court, the judge can order the finance provider (and possibly the dealership) to:

• Pay compensation for your losses and legal fees.

• Terminate/adjust the finance agreement.

• Repair or replace the vehicle under certain consumer protections.

However, winning a case doesn’t always guarantee immediate payment. You may still need to enforce the judgment, which can involve further legal procedures if the defendant is uncooperative.

Alternative paths to resolution

Even if you’ve prepared for court, it’s not uncommon for finance providers to propose a settlement before the hearing. Settling can save both parties time, money, and stress. Always evaluate any settlement offer’s terms to ensure you’re not forfeiting legitimate claims or receiving inadequate compensation.

Choosing a legal route can feel intimidating, but it remains a powerful tool if you believe you’ve been seriously wronged or left out of pocket. By staying informed about the process, potential costs, and expected outcomes, you’re better placed to make decisions about when, or if, to escalate your dispute into a formal legal challenge.

Conclusion

Navigating car finance claims successfully is about being informed, organised, and proactive. Whether you’re dealing with Hire Purchase or Personal Contract Purchase, the potential for disagreements is real—from hidden fees and mis-selling, to vehicles not meeting expected standards. Understanding your rights under legislation like the Consumer Credit Act 1974 and the Consumer Rights Act 2015 equips you with a strong foundation if disputes arise.

The journey typically begins with confirming that you have a valid claim, which requires gathering documentation, scrutinising the agreement’s terms, and perhaps seeking a professional assessment. Should you decide to move forward, structured communication with the finance provider, dealership, and possibly the Financial Ombudsman Service forms a critical path to resolution.

Crucially, while your feelings of frustration or financial pressure might be intense, it pays to remain constructive and patient throughout. Keep paying any scheduled instalments unless instructed otherwise, maintain reputable channels of communication, and be prepared to escalate your case only when necessary. With the right approach, many disputes can be resolved without recourse to lengthy or expensive litigation.

Above all, your car finance arrangement is meant to facilitate ownership or use of a vehicle in a fair and transparent manner. If it falls short of that objective, the UK’s consumer protection framework is designed to help you seek redress. By leveraging that framework effectively, you can address the issue and secure a fair outcome that respects both your consumer rights and the realities of vehicle finance agreements.

Frequently Asked Questions

Understanding HP and PCP finance

What’s the main difference between HP and PCP?

Hire Purchase (HP) involves paying for the entire cost of the car through fixed monthly payments, leading to ownership upon completion. Personal Contract Purchase (PCP), however, involves lower monthly payments covering depreciation, with a balloon payment at the end if you wish to own the vehicle.

Can I end my car finance early?

Yes, both HP and PCP agreements allow early settlement. You may incur fees or a settlement figure that includes interest adjustments, so always confirm these details with your lender before proceeding.

How do balloon payments work in PCP?

A balloon payment, or Guaranteed Future Value (GFV), is a lump sum paid at the end of a PCP agreement to own the car. Alternatively, you can return or part-exchange the car if the payment isn’t affordable.

Making a claim

How do I start a claim about my car finance?

Start by submitting a formal written complaint to your finance provider, clearly outlining your issue, including evidence such as documentation and correspondence.

Can I claim if I feel the dealer misled me?

Yes, misrepresentation by a dealer, especially if it affected your decision to enter a finance agreement, could provide grounds for a valid claim.

What kind of evidence supports a car finance claim?

Strong evidence includes your original finance agreement, written correspondence, emails, independent mechanic reports, payment records, and promotional materials.

Vehicle-related claims

What happens if the financed car is faulty?

Under the Consumer Rights Act 2015, you have rights to a repair, replacement, or refund if your car develops significant faults soon after purchase. Report faults promptly to both dealership and lender.

Can I reject a faulty car bought on finance?

Yes, within 30 days of purchase, you can reject a faulty car for a full refund under the Consumer Rights Act 2015, even if financed via HP or PCP.

Who is responsible for repairing my financed car?

Typically, responsibility lies with the finance provider, who may coordinate with the dealership to arrange repairs or reimbursements.

Financial obligations during claims

Do I still need to pay during an ongoing claim?

Yes, unless explicitly agreed otherwise in writing by your lender, you must continue making payments to avoid damaging your credit score.

Can I pause my payments if there is a dispute?

Some lenders might agree to a temporary pause or reduced payments during a dispute. Always obtain written confirmation before stopping or adjusting your payments.

Will making a claim affect my credit rating?

A claim itself won’t affect your credit rating, but missed or delayed payments during the dispute process could negatively impact it.

Legal rights and protections

What protection does the Consumer Credit Act provide?

It ensures lenders provide clear contractual terms, allows withdrawal within 14 days (cooling-off period), and offers protections like Section 75 joint liability for misrepresentation claims.

What does Section 75 protection mean for me?

Section 75 makes your finance provider jointly responsible with the dealership if the vehicle or finance agreement is misrepresented or breached, applicable to purchases between £100 and £30,000.

When can I use voluntary termination?

You can voluntarily terminate your finance agreement once you've paid at least 50% of the total amount payable. This ends your obligation to continue payments.

Escalating disputes

What if the finance provider rejects my claim?

If your claim is rejected, you can escalate your complaint to the Financial Ombudsman Service (FOS) for independent adjudication.

How long does the Financial Ombudsman Service process take?

Typically, it can take several months for the FOS to thoroughly investigate and provide a final decision. Patience is essential, but updates can be requested periodically.

Do I need legal representation for the Ombudsman?

Legal representation isn't required for the Ombudsman process, but you may choose to have assistance from consumer advice organisations or legal advisors for complex claims.

Legal action and court procedures

When should I consider going to court?

Consider court action if informal methods and the Ombudsman process fail, particularly for significant financial loss or serious breaches of contract or legislation.

What court should I use for car finance claims?

Claims up to £10,000 in England and Wales (or £5,000 in Scotland) usually go through small claims procedures. Higher-value or more complex cases might go to county or higher courts.

Are there costs involved with going to court?

Yes, court claims typically involve fees, legal expenses, and potentially other costs, though these might be recovered from the opposing party if you win.

Settlements and negotiations

Should I accept an early settlement offer from my finance provider?

Evaluate any settlement carefully, ensuring it covers your losses adequately. Consider consulting independent advice before accepting, particularly for complex or high-value claims.

Can negotiating directly with the dealer resolve my claim faster?

Negotiating directly with the dealership might speed up resolution for minor vehicle issues, but always confirm with your lender to avoid inadvertently compromising your formal claim.

General advice

What organisations can help me with my car finance claim?

Citizens Advice, Financial Ombudsman Service (FOS), and Trading Standards are all reliable organisations offering guidance and support throughout the claims process.

What should I do if I'm uncertain about my rights?

If you're unsure, seeking advice from consumer rights groups or solicitors specialising in consumer finance can provide clarity and confidence in proceeding with your claim.

Still have questions?

If you’re still unsure about your specific situation—whether it’s deciding if you have a valid claim, understanding complex finance terms, or navigating the process of escalating a dispute—speaking directly with an expert can provide the clarity you need. They can offer personalised advice tailored to the details of your contract, your vehicle, and any unique circumstances that might influence your potential claim. If you have unresolved concerns or simply want additional guidance, consider chatting to a professional who deals with car finance cases on a regular basis.

Glossary

Affordability checks

Assessments carried out by finance providers to ensure customers can comfortably repay finance agreements without undue financial hardship.

Annual Percentage Rate (APR)

The overall cost of borrowing money, expressed as an annual percentage, including interest and additional fees.

Arrears

Payments missed or overdue on your finance agreement, potentially leading to fees and negative impacts on credit scores.

Balloon payment

A large, final payment due at the end of a PCP agreement to own the vehicle outright; also known as the Guaranteed Future Value (GFV).

Broker

A third-party individual or company who arranges car finance between a customer and a lender, usually earning commission from the provider.

Conditional sale

Similar to Hire Purchase, this agreement involves monthly instalments with ownership transferring automatically once all payments are complete.

Consumer Credit Act 1974

UK legislation governing consumer credit agreements, including key protections such as cooling-off periods and voluntary termination rights.

Consumer Rights Act 2015

Law outlining consumer rights regarding product quality, refunds, repairs, and replacements, including rights specific to vehicle purchases.

Contract mileage

The annual mileage limit set out in a PCP agreement; exceeding this limit can result in additional charges.

Cooling-off period

A statutory period (usually 14 days) during which you can cancel certain finance agreements without penalty.

Credit rating

A numerical representation of your creditworthiness based on your financial history, affecting eligibility for finance and interest rates offered.

Credit reference agency

Companies (such as Experian or Equifax) that collect credit information on individuals to inform lending decisions and credit scores.

Default notice

A formal notice issued when payments are missed, indicating you have breached your finance agreement, potentially leading to repossession.

Depreciation

The reduction in value of a vehicle over time, particularly important for determining PCP monthly payments and balloon payments.

Early settlement

The process of paying off your finance agreement in full before the scheduled end, potentially incurring early repayment charges.

Equity

The value left in the car after subtracting the remaining finance owed; positive equity can be used as a deposit for a new vehicle or agreement.

Excess mileage charges

Fees imposed at the end of a PCP agreement if you exceed the agreed mileage limit, typically charged per mile.

FCA (Financial Conduct Authority)

The UK regulatory body responsible for supervising finance companies and ensuring fair consumer treatment.

Final response letter

A formal written reply from your finance provider to your complaint, outlining their final decision and reasons.

Financial Ombudsman Service (FOS)

Independent service resolving disputes between consumers and finance companies; its decisions are binding on providers.

Gap insurance

Optional insurance covering the difference between a car’s market value and the outstanding finance amount if the car is stolen or written off.

Guaranteed Future Value (GFV)

The estimated value of a vehicle at the end of a PCP contract, set at the agreement’s outset and payable if you choose to own the car.

Hire Purchase (HP)

Finance arrangement involving fixed monthly payments to buy a vehicle, with ownership transferring upon final payment completion.

Joint liability

Legal principle under Section 75 of the Consumer Credit Act making lenders jointly liable with dealers for misrepresentation or breach of contract.

Misrepresentation

Providing false or misleading information that influences someone’s decision to enter into a finance agreement.

Mis-selling

Selling financial products through incorrect, misleading, or incomplete information, potentially resulting in claims or compensation.

Negative equity

Occurs when the outstanding finance amount exceeds the vehicle's current market value, often affecting trade-ins and refinancing options.

Notice of sums in arrears

Official notification from your finance provider indicating that you’ve missed payments and detailing the outstanding balance.

Part-exchange

Trading in your existing vehicle as partial payment towards a new car or finance arrangement.

Personal Contract Hire (PCH)

Leasing agreement where you pay monthly instalments to use a vehicle without the option of ownership.

Personal Contract Purchase (PCP)

A car finance product involving low monthly payments covering depreciation, with a final balloon payment if ownership is desired.

Refinance

Replacing your existing finance agreement with a new loan or arrangement, typically to reduce monthly payments or change terms.

Repossession

Legal action whereby a finance provider takes back a vehicle due to significant payment arrears or breaches of the agreement terms.

Residual value

Estimated resale or market value of a car at the end of a finance agreement, crucial in calculating PCP balloon payments.

Right to withdraw

Statutory entitlement allowing cancellation of certain finance agreements within the cooling-off period, typically 14 days.

Section 75

Consumer protection provision under the Consumer Credit Act 1974 making lenders jointly responsible for misrepresented goods costing £100 to £30,000.

Termination fee

Charge levied by finance providers if you end your finance agreement early, often covering administrative costs.

Total amount payable

The full amount you repay over the entire term of your finance agreement, including the initial amount borrowed, interest, and additional charges.

Trade-in value

The amount a dealership offers to credit towards a new vehicle or finance agreement when you trade in your current car.

Unfair Contract Terms Act 1977

Legislation providing protection against contract clauses that unfairly disadvantage consumers in finance agreements.

Voluntary surrender

Returning a financed vehicle voluntarily to your lender, usually when you can't afford payments, though this may negatively impact your credit rating.

Voluntary termination

Legal right under the Consumer Credit Act allowing you to end an HP or PCP agreement once you've paid at least 50% of the total amount payable.

Wear and tear guidelines

Standards set by finance providers outlining acceptable vehicle condition at the end of PCP agreements, influencing potential charges for damage.

Useful organisations

Financial Conduct Authority (FCA)

The FCA regulates finance companies, ensuring that lenders adhere to fair and transparent practices. They offer guidance on your rights under financial agreements and handle serious complaints against regulated businesses.

• Phone: 0800 111 6768

• Website: www.fca.org.uk

Financial Ombudsman Service (FOS)

An independent organisation that resolves disputes between consumers and financial institutions. The FOS investigates complaints fairly and impartially, offering a resolution service free of charge.

• Phone: 0800 023 4567

• Website: www.financial-ombudsman.org.uk

Citizens Advice

Citizens Advice provides free, confidential, and impartial advice on consumer rights, including car finance agreements. They can support you through complaints procedures and dispute resolutions.

• Phone: 0800 144 8848

• Website: www.citizensadvice.org.uk

Trading Standards

Local authority departments responsible for enforcing consumer protection laws. Trading Standards can advise on issues related to car finance, particularly in cases involving misrepresentation or unfair trading practices.

• Phone: Contact via your local council

• Website: www.tradingstandards.uk

MoneyHelper

A government-backed service providing free and impartial advice on managing personal finances, including guidance on car finance products and your rights regarding disputes.

• Phone: 0800 138 7777

• Website: www.moneyhelper.org.uk

StepChange Debt Charity

Offers specialist advice and support if you are experiencing financial difficulties related to car finance, helping you manage debt and negotiate with lenders.

• Phone: 0800 138 1111

• Website: www.stepchange.org

All references

Citizens Advice (2021) Consumer rights guidance for car buyers. Citizens Advice Bureau. https://www.citizensadvice.org.uk/consumer/buying-or-repairing-a-car/problems-with-a-used-car/

Citizens Advice (2023) How to approach disputes in car finance. Citizens Advice Bureau. https://www.citizensadvice.org.uk/debt-and-money/borrowing-money/types-of-borrowing/hire-purchase-and-conditional-sale/

Financial Conduct Authority (2022) Car finance market report. Financial Conduct Authority. https://www.fca.org.uk/publications/multi-firm-reviews/car-finance-market-study

Financial Ombudsman Service (2020) Guidance on Section 75 claims. Financial Ombudsman Service. https://www.financial-ombudsman.org.uk/consumers/complaints-can-help/credit-borrowing-money/section-75

Financial Ombudsman Service (2021) Annual consumer credit complaints summary. Financial Ombudsman Service. https://www.financial-ombudsman.org.uk/data-insight/annual-complaints-data

Financial Ombudsman Service (2022) Resolving complex car finance disputes. Financial Ombudsman Service. https://www.financial-ombudsman.org.uk/consumers/complaints-can-help/car-finance

Which? (2021) Essential steps in car finance claims. Which?. https://www.which.co.uk/consumer-rights/advice/how-to-complain-about-car-finance-a3E9X4l2LJXy

Which? (2022) Consumer Rights Act explained. Which?. https://www.which.co.uk/consumer-rights/regulation/consumer-rights-act-aKJYx8n5KiSl

Disclaimer

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