Assessing Affordability: A FOS Case Study on Car Finance Repayments


Affordability is a critical aspect of any financial commitment, especially with car finance agreements. A case reviewed by the Financial Ombudsman Service (FOS) highlights the importance of comprehensive affordability checks by lenders before entering into a finance contract, and what can happen if such checks are not adequately performed.

Tom’s Predicament:

Tom found himself in financial difficulty, struggling to keep up with his car finance repayments. After missing two payments, the finance company warned him about reclaiming the car and the potential impact on his credit file. Looking for a solution, Tom approached the FOS.

Background Details:

Tom, who was 24 years old and employed, earned £1,200 per month and had existing commitments, including rent, utility bills, food, and payments towards a credit card and an outstanding car loan. His new car finance agreement demanded £245 monthly over three years, a significant addition to his already stretched budget.

The Investigation:

Upon review, the FOS gathered details from both Tom and the finance provider. Tom had been in possession of the car for about six months and had already missed a repayment. The finance company had conducted a credit check and an underwriting assessment confirming that Tom was employed; however, it did not fully consider his income against his existing financial obligations.

FOS’s Decision:

The FOS concluded that the car finance provider had failed to conduct an adequate affordability assessment for Tom. Given his income and outgoings, it was clear that Tom would struggle to manage the additional £245 monthly repayment. The finance provider should have delved deeper into Tom’s finances rather than merely confirming his employment.

As a resolution, the FOS instructed the finance provider to repossess the car, cancel the remaining finance amount, and rectify any negative entries on Tom’s credit file caused by this agreement. In consideration of Tom’s use of the car, a reasonable contribution towards this use was deemed appropriate. Furthermore, the FOS ruled that the £500 deposit Tom had initially paid should be refunded to him with interest, acknowledging that a thorough affordability assessment would have likely resulted in a declined application.

Learning Points for Consumers:

  • Lenders are responsible for ensuring you can afford repayments before approving finance.
  • As a consumer, it’s important to realistically assess your financial situation, including income and expenses, before committing to new debt.
  • If you’re facing financial difficulties, it’s crucial to communicate with your finance provider early to discuss potential solutions.


This case study emphasises the paramount importance of responsible lending and thorough affordability checks. For those considering car finance, or any credit agreement, understanding your financial capacity is essential to avoid future repayment difficulties.

You can read more about this specific case study on the Financial Ombudsman website HERE.


This content is provided for educational purposes only and does not constitute financial advice. If you face similar challenges with your car finance repayments, consider seeking professional guidance to explore your options and rights.

The information provided on is for general informational and educational purposes only. This site is not affiliated with any financial institutions or claims management companies, and does not provide financial, legal, or professional advice. The content of this site is not intended to be a substitute for professional advice. Always seek the guidance of a qualified professional with any questions you may have regarding a financial or legal matter. Please read our full disclaimer for more information.