The FCA and Ombudsman have found that approximately 560,000 UK motorists(1) are eligible to claim back money on PCP finance, which is a form of credit used to finance vehicles. It is currently the most popular way to finance a vehicle, with 90% of cars in the UK being bought with PCP finance as of May 2022.
What is PCP Finance?
Personal Contract Purchase (PCP) is a way to pay for a car which works similar to a long-term rental, allowing you to use the car until the contract ends.
To begin, drivers pay a deposit on their car, which usually totals around 10-20% of the car’s total value. The remainder is then paid off over a set period, month by month. This period can vary, but is often 3-4 years. At the end of the contract, you have three options:
- Return the car to the lender
- Make a balloon payment and keep the car
- Use the resale value towards purchasing a new car with your provider
What makes PCP finance different from a long-term rental?
The monthly payments made in a PCP finance agreement are higher than the payments made on a leased car. However, a leased car must be returned at the end of a contract, but with PCP finance the driver has more options.
Similar to renting a car, the driver doesn’t own the car for the duration of the contract, and is usually in the name of the PCP provider until the final balloon payment is paid. After this, the car can be transferred to the driver’s name.
Why do people claim money on PCP finance?
Many drivers have been mis-sold PCP finance over the years. The Financial Conduct Authority estimates this number to be over 560,000 and motorists can check their eligibility for a claim – find out more information here(2).
People who claim money on PCP finance believe that their seller did not explain important details such as fees, interest rates, and other costs. This can end up costing drivers more than anticipated.
For example, many PCP providers failed to explain hidden mileage costs to buyers. This meant that for every mile driven beyond a set amount, usually hidden in the fine print, drivers were charged high fees.
Many sellers have also felt pressured into loans that they could not afford. This includes lenders who withheld important information about financial alternatives, or who pressured buyers into purchasing add-ons such as unneeded insurance.
Is there a deadline to claim PCP finance?
Claims can be made for any car bought within the last 10 years.
How much can I win back with a PCP finance claim?
The average amount that people can win back is around £3000, but people can even win compensation of up to £10,000.
The amount of compensation you could win back depends on a number of factors such as the duration of the PCP agreement, the value of the vehicle, and the amount and interest that you have been mis-sold.
How do I make a PCP finance claim?
Gather whatever evidence you can. This includes your original finance agreement and any correspondence with lenders. Even your own personal testimony and documentation counts as evidence.
Next, go through the complaints procedure with your lender. Only if they reject your request for help can you escalate the claim. After this, you can launch an investigation with the Financial Ombudsman Service.