Motorists who have purchased vehicles using a specific type of car finance arrangement from dealerships may have unwittingly become entangled in a mis-selling predicament. The National Association of Commercial Finance Brokers (NACFB) highlights that numerous buyers might have been led astray by their car dealers.
Car dealerships are entrusted with the responsibility of fully informing buyers and providing comprehensive advice. Failure to furnish buyers with all pertinent information about their agreement could potentially lead to a case of mis-selling. If you’ve found yourself in such a situation, here’s what you need to be aware of.
Understanding Car Finance Mis-selling:
Lenders and car dealers bear the obligation of furnishing you with complete information about your car finance agreement. This encompasses offering detailed advice regarding your finance alternatives and offering a clear breakdown of the agreement’s inclusions and limitations. If they concealed critical information about the agreement or neglected to elaborate on all commissions and interests imposed, you could have been subjected to car finance mis-selling. Such instances result in you being unable to make an informed decision, potentially leading you to accept an unaffordable deal or a car that doesn’t align with your requirements. If you’ve been mis-sold car finance, you may qualify for compensation.
Identifying Car Finance Mis-selling:
Buyers who have secured cars through deals are more susceptible to falling victim to car finance mis-selling. PCP (Personal Contract Purchase) deals often harbour intricate details and essential fine print within their contracts. When opting for a PCP car finance agreement, you’re required to make an initial deposit followed by a series of monthly payments. The agreement’s culmination offers two options: making a ‘balloon’ payment to claim ownership of the car or returning the vehicle.
For instance, if a car’s value is initially £15,000, the dealer might anticipate its value to depreciate to around £8,000 by the agreement’s end. This implies that the disparity between these two values is covered through your monthly payments throughout the agreement. If you decide to terminate the contract, the ‘balloon’ payment equating to the depreciated value must be paid, amounting to an additional £8,000 on top of the regular monthly payments. Some dealers might obscure the ‘balloon’ payment or interest rates, leading to misinformation among customers. If the dealer didn’t clearly elucidate these components, there’s a possibility you’ve been victimized by car finance mis-selling. While choosing a PCP deal is not inherently problematic, it’s crucial to ensure that the dealer provides a lucid explanation of the process before you commit. Some dealers might promote PCP deals as more cost-effective than Hire Purchase (HP) agreements without offering a comprehensive breakdown of costs and interest rates. To avert entering a deal that doesn’t align with your needs, it’s imperative to meticulously review the contract. Source ( confused.com )
Was My Car Finance Deal Mis-sold
- Your car finance agreement could have been mis-sold if:
- The car dealer failed to disclose that they would earn a commission on the vehicle sale.
- The commission and interest rates weren’t transparently communicated.
- The car finance agreement terms or conditions weren’t adequately explained.
- The PCP payments were unrealistic.
- No financial credit checks were conducted.
- You felt coerced into the deal without being presented with alternative options.
What to Do If You’ve Been Mis-sold Car Finance:
- Gather Evidence: The initial step involves collecting as much documentation as possible to establish proof of the mis-sold car finance agreement. This includes the contract, correspondence with the dealer, and records of your monthly payments.
- Lodge a Complaint with the Finance Company: Prior to taking formal action, it’s advisable to contact your finance provider and understand their official complaint procedure. Present your situation to them and afford them the opportunity to rectify any issues. They may be able to address the matter internally, potentially saving you from escalating the complaint.
- Contact the Financial Ombudsman Service (FOS): If the previous step proves ineffective, you can escalate the matter to the Financial Ombudsman Service (FOS). The FOS is an independent body that oversees financial services in the UK. They might investigate your case and handle instances of proven misconduct. Keep in mind that the FOS only intervenes after the lender’s complaints procedure has been exhausted.
- Consider Small Claims Court: The FOS’s decision often marks the final resolution, but in some cases, lenders or customers may pursue legal action through small claims court if dissatisfied. It’s important to seek legal advice before opting for this route, as it can be costly, particularly if the case isn’t successful. Small claims court is applicable for claims up to £10,000.
Common Mis-selling Types:
Several common reasons for car finance mis-selling claims include:
- Undisclosed or Hidden Commissions: Customers claim ignorance about commission payments, wherein dealers receive a commission or fee from introducing buyers to a finance company of their choice.
- Lack of Affordability Checks: Some customers enter into car finance agreements without a clear understanding of their financial suitability, resulting in eventual payment defaults.
- Incomplete Explanation of Financing Options: If dealers fail to elucidate alternative buying options, mis-selling may have occurred.
- Unexplained Ownership at Agreement’s End: Dealerships should clearly outline what occurs at the agreement’s conclusion, including ‘balloon’ payments and ownership status.
Quantifying Compensation for PCP or Car Finance Mis-selling:
- The amount of potential compensation hinges on various factors:
- The loan’s magnitude.
- The specific complaint’s nature.
- The agreement’s duration.
- The contrast between the quoted rate and the correct rate.
- Potential inclusion of add-ons like breakdown cover and servicing.