PCP finance (the most popular way to buy a vehicle in the UK) is the latest claim scandal to emerge.
Whilst most car buyers are accustomed to paying a deposit and then making monthly payments - few realise that they might have been drastically overcharged. This comes hot on the heels of the global controversy surrounding the diesel emissions claims made by some vehicle manufacturers.
Recent investigations by the city regulator have shown more than half a million customers have been upsold, overcharged or mis-sold products - and now drivers can claim up to £10,000 on their car purchases. This guide aims to explain more about the PCP finance scandal, how to check your eligibility and how much you could personally claim back.
What is PCP Finance?
Personal Contract Purchase, more commonly known as PCP, is the most popular form of car financing. The reason it is so popular is because it is one of the cheapest and most effective ways to buy a car while putting down the least amount of money upfront.
Typically, the purchaser puts down a deposit of 10-20% of the vehicle's value or they trade in an existing vehicle and use its value to offset the deposit. The purchaser then agrees to make fixed monthly payments to the dealer for the duration of the finance period (usually 36 to 48 months).
During the duration of the PCP contract, the vehicle does not technically belong to the buyer. It will usually be in the name of the PCP provider. However, at the end of the contract term, the buyer has the option to make a 'balloon' payment to pay off the remaining balance. If the borrower chooses to make the balloon payment, the car then belongs to the buyer and is transferred into their name.
PCP is popular because it allows consumers to buy cars, even when they don't have the money to buy it outright. Many people also like that they have the option to own the vehicle outright at the end of the agreement or to hand it back and get a new car on another PCP deal. In March 2022, it was confirmed that 90% of cars were bought using PCP finance. The ability to get a new car every three to four years is certainly appealing - so why not?
Could I have been mis-sold PCP finance?
It's very possible that you could have been mis-sold PCP. The UK's regulator, the Financial Conduct Authority, launched a thorough, two-year investigation which found that over 560,000 borrowers had been mis-sold the financial product. You can check online if you are one of the motorists who could be eligible.
The main issue with PCP finance is surrounding pricing and transparency, since car dealerships which arrange your PCP finance are often heavily financially incentivised. Not only do different customers get offered different rates based on the availability of offers, but there are also other terms and upsells which are being mis-sold, including:
- add-on insurance
- high interest rates
- hidden fees
- unclear wording or terms surrounding your PCP arrangement
If any of these things ring true to you, t you could have been mis-sold PCP, and could be eligible for compensation.
Am I eligible to make a mis-sold PCP finance claim?
According to independent consumer champion, Forces Compare, you could be eligible if any of these things apply to you:
- The fees, total cost, and interest rates attached to your PCP contract were not clearly explained to you.
- Your seller offered you less competitive rates than you should have been offered.
- Your seller did not explain how vehicle ownership works during your PCP agreement.
- You were not told about the mileage limit tied to your contract.
- You were sold a loan when your seller knew it was unaffordable for you.
- Your lender neglected to tell you about alternative financial products.
- You were pushed to buy add-on insurance, which you did not need.
- You were not told that if you damage the vehicle, you will incur high charges.
How much compensation could I receive from a PCP finance claim?
You could be eligible to claim up to £10,000 in compensation if you have been mis-sold PCP. The average claim is worth £3,000 which includes a reimbursement of any costs incurred so far and 8% compensation on top. The amount you receive depends on a number of factors including:
- the amount and interest that you have been mis-sold
- the amount you have paid so far
- the age, condition and value of the car
- the length of the PCP agreement
The earlier you make a claim, the more likely it will be upheld and paid in full.
How soon will my PCP claim be paid?
Claims can take several weeks or months to process depending on the strength of your case, the amount owed and the dealership in question. Some claims are reviewed and completed in under four weeks. Others take might six to 12 months.
How can I make a claim for mis-sold PCP finance?
If you are considering making a claim for compensation, you should gather any evidence you may have against your seller. This could be pre-contract documentation, any emails about your contract, terms, or interest. Essentially, any evidence may be useful.
If you do not have any concrete evidence, that might not prevent you making a claim. Many claimants simply explain what happened and are still approved for compensation.
For the Financial Ombudsman Service to investigate your claim, you must have filed a complaint directly with your lender.
Do PCP claims apply to second-hand cars?
Yes, you can claim for second-hand or used cars that were purchased using PCP finance. You can apply for compensation for up to ten years following the signing of your contract. The amount you can receive in compensation may vary depending on the age, condition and on the road value of the vehicle.
Copyright 2022. Article made possible by Tudor Lodge Digital.