What is PCP finance?

Estimates suggest that consumers buy around 80% of new cars using PCP. Between 2007 and 2020, experts also believe that HP and PCP mis-selling cost UK consumers approximately £300,000,000 per year.

Personal Contract Purchase (PCP) is a popular car finance option that lets consumers pay for a vehicle over 36 to 48 months without owning it during the term. At the end, the borrower can either return the car, pay a final ‘balloon payment’ to own it, or trade it in for a new PCP deal. Essentially, PCP is like a personal loan that spreads payments over two to three years. Unlike a standard loan, you don’t pay off the car’s full value and won’t own it unless you make the balloon payment. PCP involves a deposit, the borrowed amount, and the balloon payment.

About mis sold PCP claims

Mis sold PCP claims arise when a finance agreement has been sold under unfair or unclear terms. This can happen if the dealer fails to properly explain the terms, omits crucial information, or misleads the buyer about the total cost and additional fees. If your PCP deal was taken out between 2007 and 2020, you should be able to make a claim.

Moreover, in 2021, the FCA banned discretionary commission arrangements. This ban followed an investigation that proved many dealerships increased commissions on PCP deals without informing the customer. Consequently, you can make PCP claims based on these hidden commissions and other forms of mis-selling, such as:

• Non-disclosure of commissions. Dealers often did not disclose that they received commissions from the finance company, which led to inflated interest rates for consumers.
• Improper affordability checks. Dealers may have failed to perform adequate checks to ensure the borrower could afford the repayments.
• Hidden fees & charges not clearly communicated. For example, mileage limits or end-of-term charges.
• Pressure from salesperson. High-pressure tactics can lead to rushed and regrettable purchases.

Overcharged Interest Example

You were given a flat interest rate of 5% on your deal. With no other rates available at the time, it made 5% seem low. However, this flat rate actually increased the APR to over 10%.

If you filed a mis-sold PCP claim, you might be eligible for a refund based on the difference between the interest you paid and the lowest rate available at that time. For instance, if the lowest rate was 2.5%, you could receive the 2.5% difference over the agreement period, plus interest.

How do PCP claims work?

If you believe you have been mis-sold a PCP or HP finance deal, complete our free car finance compensation check to see if you have grounds to claim.

• Check. Complete our car finance compensation check.
• Review. We assess claims to determine their validity. This includes checking if charges were unfair or if you were misled.
• Negotiate. One of our Legal Panel firms will process and negotiate your claim.
• Compensation. If successful, you could receive compensation for the overpaid amounts and potentially additional damages.

How do I know if I have a mis sold PCP claim?

You may have a valid claim if:

• The dealer did not inform you about any commissions they received.
• The interest rates were higher than necessary due to dealer incentives.
• The dealer did not conduct proper affordability checks.
• Key details about the contract, such as mileage limits or end-of-term fees, were not disclosed​.

Conclusion

Mis sold PCP car finance is a significant issue affecting many consumers. Therefore, by understanding your rights and the claims process, you can seek compensation if you’ve been unfairly treated. Moreover, stay informed and submit your claim today by taking our free, no-obligation compensation check. Recoup your losses and get the compensation you deserve.

For more information, visit the Financial Conduct Authority’s official website.