In short, Personal Contract Purchase (PCP) is effectively a personal loan. It allows drivers to spread the payments for a vehicle over a long period. For example, two or three years. However, unlike a normal personal loan, you won’t be paying off the full value of the car and you won’t necessarily own it at the end of the deal. Unless, you chose to pay the final balloon payment. PCP is one of the more complex financial products available to help you buy a car, consisting of the deposit, the amount you borrow, and the balloon payment.

Hire Purchase (HP) is a type of car finance that covers the costs of used or new vehicles. If you find yourself unable to afford a new car upfront, this option enables you to drive away with your desired vehicle without the need to pay a substantial lump sum.

HP allows you to pay for a car in instalments over a set period of time. You’ll typically pay a deposit to release the funds for leasing the car over the agreed term, then pay the lender back over time. At completion, a final one off payment is due. Meaning, you will then own the car outright.

The Financial Conduct Authority (FCA) defines a discretionary commission arrangement (DCA) as an agreement between lenders and brokers that allowed brokers to adjust the interest rates offered to customers, often resulting in higher commissions for brokers when interest rates increased. While the FCA banned this practice in 2021, they are now conducting an industry-wide review to determine whether there has been widespread non-compliance with the relevant regulations, potentially leading to financial loss or harm to consumers. Read more about DCA here. 

PCP is the most prevalent financial product in the market. Dealers use PCP finance to draw in people who want to change their car every few years. 

On the other hand, HP finance is an agreement that gives you the option to own the car at the end of the agreement. This is a fixed cost throughout the term with the Annual Percentage Rate (APR) set before the contract begins. 

A recent Financial Conduct Authority (FCA) investigation discovered widespread evidence of mis-selling on all types of vehicle financing options.

The FCA discovered that brokers had discretion to adjust interest rates in the car loan scandal. As a result, charging higher interest rates to consumers led to larger commission payments to dealerships from finance providers. It concluded that this scandal might have cost UK consumers an estimated £300,000,000 per year between 2007 and 2020.

Mis-selling was found across all vehicle types involved in the car loan scandal. For instance, this includes new and used cars, vans, motorcycles, motor homes, and caravans. Additionally, this issue affected all vehicle financing options, such as personal contract hire (PCP), hire purchase (HP), contract hire, and car loans. Among these options, PCP agreements were the most popular, characterized by lower monthly payments followed by a final lump sum or ‘balloon’ payment. Therefore, as PCPs are essentially interest-only loans, interest charges were often higher than anticipated in the car loan scandal.

In 2021, the FCA banned discretionary commission arrangements (DCAs).

If you have acquired a vehicle through PCP or HP financing between 2007-2020 and the financing arrangement was improperly sold to you, you might have grounds to pursue compensation for mis sold car finance.

In short, eligibility for mis-sold HP or PCP finance claims qualify for a number of reasons. They apply to individuals who have encountered situations where the salesperson failed to provide a comprehensive overview of available financing options, inadequately explained the contract’s intricacies, such as interest rates. Additionally, they omitted conducting affordability assessments or neglected to disclose information about their own commission earnings.

Furthermore, mis-sold car finance claims can be initiated under the following circumstances:

• Compensation claims can be lodged for both new and pre-owned vehicles procured via financing.
• Additionally, claims can encompass various types of vehicles, ranging from cars to vans and trucks.
• Agreements that are either ongoing or have concluded are eligible for claims.
• It is possible to file claims for multiple vehicles concurrently.

The timeline for resolving your claim can differ depending on the circumstances. For instance, if the car dealership or finance broker acknowledges their role in the mis-selling, you may expect to receive compensation within a few months. However, if there is a dispute regarding liability, the process might extend to a range of 12 to 18 months. Therefore, engaging an experienced member of our panel to handle your case can expedite the claims process.

The precise compensation amount for a car finance payout will fluctuate and numerous factors must be considered, for example: 

• Loan amount: The greater the loan, the greater the owed compensation.
• Agreement Date and term: The more extensive your history of loan payments, the higher the owed compensation.
• Interest rate disparities and the discrepancy between the quoted rate and the appropriate rate.
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Initiating a mis-sold car finance claim won’t entail any upfront costs. Additionally, enquiring with our expert panel comes at no charge. If they beleive their is grouds for a claim, it will be conducted on a No Win, No Fee basis, meaning you won’t face any fees for their time even if the outcome is unfavorable.

No, it is not imperative to enlist the assistance of a third-party entity for the pursuit of this claim. Therefore, you retain the right to directly address your concerns and submit a complaint to the responsible party without the need for external representation by a firm or individual.