PCP Claims

PCP Claims2024-03-18T15:23:40+00:00

Understanding PCP Car Finance Claims in the UK:

A Guide to Your Options

Navigating the world of car finance can be complex and unnecessarily hard work; especially when it comes to Personal Contract Purchase (PCP) agreements. If you’ve found yourself questioning the terms of your PCP or wondering if you’ve been given all the necessary information, you’re not alone. Across the UK, many consumers are waking up to the idea that they may have been misled by their PCP car finance provider or dealer, and are exploring PCP claims to understand their legal rights and options.

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What is a PCP Claim?

PCP claims are something you may consider if you believe your Personal Contract Purchase agreement was mis-sold to you. This could mean that you weren’t given the full picture about the costs, the contract terms weren’t clear, or perhaps you were not made aware of all the options available to you. Knowing the ins and outs of your agreement is essential, and if there’s a gap, a PCP claim could be a way to address it.

You can read our page on the reasons why people may make PCP claims for more information.

Why Explore PCP Claims?

If you feel you have been mis sold, misled or taken advantage of, it could have left you out of pocket and paying more than you should have. Aside from getting justice for a potential wrongdoing, few people can afford to pay more than they need to in a tough economic climate. Understanding what a PCP claim entails is the first step towards making an informed decision. It doesn’t matter whether your on the bustling streets of London or the rolling hills of Scotland, the implications of a mis-sold PCP can be far-reaching. It’s not just about ensuring you got a fair deal; it’s also about peace of mind and financial clarity.

How to Approach PCP Claims

When considering PCP claims, research is your best friend. You’ll come across a variety of terms like “voluntary termination rights” or “excess mileage charges.” We advise you to take a deeper look into reputable sources or educational sites to get a better understanding. This site has been designed to provide valuable information that can help you make an educated and informed decision on whether you wish to pursue a claim against your PCP provider. It’s also here to act as a central hub of information on PCP claims, as well as signposting you to other useful sites that may be of help.

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Making a PCP Claim:

Your Options

There are a number of options available to you if you are considering making PCP claims for mis sold car finance. Each has its own merits and drawbacks, and you should research which option is best for you and your personal circumstances before making a decision.

PCP Claims and Your Finances

While dissecting the particulars of your PCP agreement, it’s wise to consider how a claim could impact your finances. This should not be considered as financial advice. It’s about equipping you with knowledge & education to make choices that help your financial well-being.

By understanding the car finance market, current position on PCP car finance claims and the options that are available to you, you can make an educated and informed decision that is based on your own personal circumstances.

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How to Check If You Can Make a PCP Claim

Whilst there are a number of websites out there offering services to check the eligibility of your PCP claims, the first place you should look is your contract, documentation and any related correspondence. This may include your terms and conditions, interest rare or any additional products that were sold to you when you made your purchase with PCP car finance.

There are some warning signs and red flags to consider when identifying if you were mis sold PCP car finance. This could include being pressured or rushed to make a decision, not being made aware of the commission being paid to the dealership or sales person you purchased the car from or having a high interest rate on your car finance product. You can read more about the red flags and warning signs of a mis sold car finance agreement in our blog.

The PCP Claims Process

The process for making PCP claims will be dependent on the route you decide to take in order to make your claim. If you choose to use a solicitor or claims management company, then the first step would be to approach a reputable provider. Each of these may have slightly different processes, but each will likely reach out to your provider as a first step. If you decide to pursue a PCP claim yourself, then the best first step would be to send a letter to your PCP contract provider to make them aware.

You can read more about the specific steps you may undertake for each of your options on our PCP claims process page.

How Much Compensation Could I get For My PCP Claim?

The amount you receive for your PCP claim is completely dependent on your personal circumstances, such as the size of the finance agreement, your interest rate or the length of your PCP car finance agreement. Whilst there have been successful claims made, any provider telling you how much you could earn is doing so purely speculatively. For example, one provider online estimates the average claim to be around £1,600 but also states that in some cases this could be more than £3,000!

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The FCA on PCP Claims

The Financial Conduct Authority (FCA), the UK’s financial regulatory body, has been actively involved in overseeing the car finance sector, including in relation to Personal Contract Purchase (PCP) claims. With the significant increase in consumer concerns & complaints surrounding PCP agreements and potential mis-selling, the FCA has taken major steps to ensure transparency and fairness in the car finance market.

In January 2024, the FCA announced temporary complaint-handling rules in response to the issues identified with discretionary commission arrangements, which could have led to consumers overpaying for their car finance. These rules were introduced as part of a broader review aimed at identifying and compensating consumers who may have suffered losses due to poor practices in the sector such as mis selling or not disclosing commissions.

The temporary measures, which became effective as of January 11, 2024, provided PCP finance providers with an extended timeframe – up to 45 weeks – to respond to complaints, while also allowing consumers an extended period to submit their claims. This reflects the FCA’s commitment to ensuring that all parties have ample opportunity to address and resolve issues related to PCP claims fairly and effectively.

The FCA has mandated that information such as the total amount payable, APR, default charges, and the cost of acquiring ownership at the end of a PCP agreement must be clearly presented to consumers before a credit agreement is finalised. Failure to provide this information in a proper and timely manner results in the credit agreement being unenforceable without a court order, therefore protecting consumers from potentially predatory lending practices.

The FCA’s involvement in car finance and PCP claims highlights the regulator’s dedication to consumer protection and the promotion of a healthy, ethical, and transparent financial marketplace. Consumers who believe they may have been affected by unfair PCP agreements now have a clearer path to seek redress, while firms are urged to adhere to higher standards of conduct in line with FCA regulations.

As the FCA continues its comprehensive review of the car finance market, the focus remains on safeguarding consumer interests and ensuring that those impacted by any malpractice receive the compensation they deserve. This proactive approach by the FCA is crucial in maintaining trust in the UK’s financial services sector and underscores the importance of regulatory vigilance in the area of PCP claims.

Mis-Sold PCP Claims

Getting to grips with the reasons car finance may have been mis sold is important if you’re thinking about making a PCP claim. The FCA investigation highlighted several ways in which it felt there was misconduct in the sales of PCP contracts, sparking its January 2024 announcement and investigation. From sketchy details to pushy salespeople, knowing these telltale signs is your first step to figuring out if you could be due for a claim.

Take a moment to think – were you ever told about that big final payment at the end of your PCP deal, or that the car wouldn’t actually be yours until you’d coughed up every penny? It’s worrying how often this crucial info gets left out. And let’s be honest, while those lower monthly payments might seem tempting, if you weren’t told about the potential pitfalls, you might have been led down the garden path and into a worse financial situation than you would have otherwise been if you had known all the facts.

Who are PCP Claims Being Made Against?

PCP claims are typically made against car dealers who act as credit brokers and the lenders who provide the finance agreements. Customers may raise complaints if they feel that their PCP car finance agreement was arranged unfairly or if the commission paid to the broker by the lender wasn’t properly disclosed. This can significantly affect the interest that customers pay or the type of loan they receive. It also means that in some cases, consumers are not fully aware of key facts, such as who owns the car at the end of the PCP agreement.

In some situations, the finance provider may be liable for claims regarding what was said by the credit broker or the supplier before the finance agreement was taken out. Claims can also be made against the credit broker themselves, particularly if the customer feels they were misled about key features of the car or the finance agreement.

The Financial Ombudsman Service often deals with such disputes when they haven’t been resolved between the consumer and the financial business. They look at what happened, what was communicated to the consumer, and decide if the complaint is valid. If widespread misconduct is found, measures are taken to ensure affected customers receive compensation in a fair and efficient manner. In some cases, there may be a case against the car manufacturer themselves.

Who your claim is against will be dependent on the circumstances around your reason for claiming and other factors. If you use a solicitor or claims management company, they will be able to advise you professionally or handle this aspect of your PCP claim for you.

PCP Claims Timeline

The Difference between Hire Purchase (HP) & Personal Contract Purchase (PCP)

When you’re looking to purchase a new car with help of finance, you’ll likely come across two popular options: Hire Purchase (HP) and Personal Contract Purchase (PCP). While they both essentially offer a way to spread the cost of a car over time, they’ve got some key differences that are worth getting your head around.

Hire Purchase is pretty straightforward. You pay a deposit, then cover the vehicle’s price with monthly instalments over an agreed period. During this time, you’re hiring the car, but once you’ve made all the payments, the car is usually yours. There’s no balloon payment – that’s a big final payment – to worry about. It’s as simple as that.

Personal Contract Purchase is a bit more flexible and more complex. Like HP, you’ll pay a deposit followed by monthly payments. However, these payments are usually lower because they’re only covering the car’s depreciation during the contract, not its full value. At the end of the term, you’ve usually got three choices: hand the car back and walk away, pay a final balloon payment to own the car, or roll any equity into a new PCP deal on another car.

The key difference? With HP, the car’s normally going to be yours at the end. With PCP, you’ve got options – you can buy, return or switch up the car. Just remember, with PCP, that final balloon payment can be a hefty sum, so consumers will need to have a plan for it if they want to keep the car. Some of the issues around PCP claims are that consumers were not adequately informed of the terms of their PCP Car Finance agreement or balloon payment.

The National Association of Commercial Finance Brokers (NACFB) argues that it is the responsibility of dealerships to make the finance options fully transparent to customers at the initial point of sale. It’s part of their remit to ensure customers are well-informed about their financial commitments when choosing a vehicle.

There are concerns regarding the dealership’s characterisation of any surplus between the projected and actual value of the car at the end of the finance term. Dealerships may refer to this difference as “profit” or “equity,” which can be misleading.

This “profit” is actually the amount by which the customer over-borrowed, leading to excess interest being paid on the finance agreement. In essence, it represents additional costs over what was necessary to cover the vehicle’s anticipated depreciation, meaning consumers could have paid more than they needed to or were aware of on their PCP car finance contract. It’s important for buyers to understand this distinction, as it affects the overall cost of financing a car and may influence the decision-making process.

PCP Claims Key Points

  • Misrepresentation of Terms: Customers may claim if they were misled regarding the PCP agreement’s terms, such as the mileage allowance or the condition of the vehicle.

  • Misleading Information on Costs: There may be a lack of clarity about the costs associated with PCP, particularly the lower monthly costs versus the total cost of credit, including any balloon payments due at the end of the agreement.

  • End-of-Agreement Charges: Claims often arise from unexpected charges at the end of the PCP agreement, such as for excess mileage or car condition.

  • Affordability Checks: Claims might involve instances where finance agreements were approved without proper assessment of the customer’s ability to afford the repayments.

  • Commission Disclosure: Concerns over whether brokers’ commissions were adequately disclosed, as these could impact the interest rate and overall cost of the finance.

  • Full Explanation and Advice: Claims may also relate to the lack of full explanation and advice given to customers about the key features of PCP and the pre-contract information required.

  • Regulatory Concerns and Review: Regulatory bodies like the FCA have expressed concerns about the potential harm to consumers in the motor finance market, particularly around the use of discretionary commission models.

  • Temporary Complaint-Handling Rules: The FCA introduced temporary rules while reviewing the car finance market to ensure that consumers who may have suffered a loss due to poor practices are compensated, specifically targeting agreements with discretionary commission arrangements made before 28 January 2021.

  • Potential Conflicts of Interest: The widespread use of commission models that link broker commissions to the customer interest rate can lead to conflicts of interest and prompt brokers to charge higher rates.

How Do We Know PCP Car Finance Mis Selling Has Been Taking Place?

The Financial Conduct Authority (FCA) has been vigilant in scrutinising the car finance market, with particular attention on Personal Contract Purchase (PCP) agreements. Their review has cast light on a range of concerns which show the prevalence of PCP claims due to mis-selling. For example, a significant finding from their report was that consumers often received insufficient information about commission arrangements, which is a clear indication of potential mis-selling. The FCA’s report revealed that only a minority of retailers provided essential disclosure early enough in the process to alert customers to potential conflicts of interest, with figures showing as few as 1 out of 37 franchised retailers and 4 out of 60 independent retailers making appropriate disclosures.

The report outlined that many customers might not have been made adequately aware of the full terms to negotiate their finance agreement. PCP agreements are particularly complex, featuring lower monthly instalments and a significant final balloon payment linked to the vehicle’s residual value. The potential for consumer harm is amplified due to the finance often being ancillary to the vehicle acquisition, rendering it a secondary consideration for consumers. The FCA’s findings were limited due to a small sample size, yet the issues raised through mystery shopping exercises suggested that mis-selling practices might be more widespread across the market.

Additionally, the report highlighted that credit broking often represents a major profit centre for motor retailers. This further underscores the necessity for transparency and integrity in the sales process, as the pursuit of profit should not come at the expense of consumer understanding and rights. The FCA’s work, including assessments of sales processes and pricing risks, indicates a proactive approach to identifying and mitigating the risks of PCP car finance mis-selling.

Consumers who believe they have been affected by PCP mis-selling may have grounds for PCP claims, especially if they were not fully informed about commission structures, possible conflicts of interest, or if they were not given the full picture of the financial implications of their PCP agreement. It is essential for potential claimants to review their agreements and seek appropriate advice if they suspect mis-selling. The FCA’s scrutiny of the market represents a step forward in consumer protection and should prompt anyone with concerns about their car finance to consider the validity of a PCP claim.

  • The FCA’s mystery shopping exercise included a small, targeted sample size biased towards independent retailers offering PCP or other hire-purchase (HP) agreements.

  • This examination raised concerns that the issues identified might be more widespread in the car finance market.

  • Only 28% of brokers in the sample provided a full explanation of the total amount payable under the finance agreement to customers.

  • Only 11 of the 122 retailers checked told their customers that the dealership would receive a commission for arranging the deal

  • PCP has grown significantly in popularity within the motor finance sector.

  • Credit broking is a significant profit centre for motor retailers, suggesting a potential for conflicts of interest that may not always be adequately disclosed to consumers.

  • The report found that during initial discussions, customers may not have been given a full understanding of their finance options, with PCP frequently being the primary product pushed, even if the customer had expressed a desire to own the vehicle outright at the end of the agreement.

  • During the mystery shopping exercise, only 31% of brokers clearly explained that for PCP agreements (and other forms of HP), customers do not own the vehicle until all sums have been paid, including any option-to-purchase fee.

Mis Sold PCP Claims Case Studies

The Financial Ombudsman provides several case studies of those who have made claims regarding car finance. In this section, we take a look at some of these case studies.

Car Finance Claims Case Studies
Car Finance Claims

UK PCP Finance Companies

Get familiar with the UK car finance companies landscape through our comprehensive directory, and keep up to date with the latest claims against specific car finance providers in the UK.

We cover a range of providers, giving you a snapshot of the market and the latest news in relation to car finance claims.

PCP Claims Information

This site aims to provide you with up to date information, education and tools so that you can gain a better picture of the PCP claims landscape. By providing you with knowledge and education of this complex area, you are able to assess whether PCP claims are the best route for you, and if so, the options available to you.

Our goal is to provide a central hub of PCP claims knowledge and news, to keep you up to speed on your rights and options should you have a legitimate PCP claim.

Why are people making PCP claims?

You may be wondering why you’re hearing so much about car finance & PCP claims all of a sudden.

In January 2024 the FCA announced it was investigating car finance companies and dealerships after it came to light that companies were falsely rejecting complaints. This announcement has opened the door for potential claims by consumers.

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What are your options to make a PCP claim?

Should you qualify to file a PCP claim, there are several routes you can take. You have the choice of engaging a solicitor, employing the services of a claims management company, or personally handling the claim. It’s important to consider the advantages and disadvantages of each approach based on your circumstances and requirements.

Types of Car Finance Affected

Car finance claims can come from a range of consumer credit agreements. The main forms of finance implicated are Hire Purchase (HP) and Personal Contract Purchase (PCP), each with their distinct structures and commitments. HP is a straightforward credit agreement where the customer repays over time and eventually owns the car, while PCP offers lower monthly payments with a significant final payment if the customer chooses to purchase the vehicle at the end of the term. It’s important for consumers to understand the specifics of their agreement, as missteps in sales processes or lack of transparency can lead to potential claims in both HP and PCP finance arrangements.

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How Do I know if I have PCP?

If you’re unsure whether you have a Personal Contract Purchase (PCP) agreement, there are some distinctive features to look for in your car finance paperwork. PCP agreements are unique as they divide the cost of the vehicle into a deposit, a series of monthly payments, and a final balloon payment to own the car outright. Typically, these agreements offer flexibility at the end of the term, allowing you to return the vehicle, part-exchange it for a new one, or pay the final sum to take ownership.

  • Initial Deposit: You paid an upfront amount when you took out the agreement.

  • Monthly Payments: Your agreement outlines lower monthly payments over a fixed period.

  • Balloon Payment: There’s an optional final payment listed to purchase the car at the end of the contract.

  • Guaranteed Future Value (GFV): The agreement includes a GFV, which is the expected value of the car at the end of the term and is equivalent to the balloon payment.

  • Mileage Limit: Your contract specifies an annual mileage limit, with potential excess mileage charges.

  • End-of-Term Options: You have options at the end of the term, such as returning the car, exchanging it, or paying the balloon payment to own it.

  • Depreciation Cover: PCP often protects against depreciation, ensuring the GFV reflects the car’s worth despite market changes.

PCP Statistics

Car Finance Claims FAQ

PCP Claims FAQs

Here are some Frequently Asked Questions that those making a PCP Claim may have:

Personal Contract Purchase (PCP) is a type of car finance agreement that allows individuals to lease a vehicle for personal use with an option to buy at the end of the contract.

PCP agreements involve paying an initial deposit followed by fixed monthly payments. At the end of the term, you can either make a final balloon payment to buy the car, return the vehicle, or trade it in for a new PCP deal.

  • If you acquired a vehicle on finance prior to the 28th of January, 2021. It was on this date when new regulations came into effect, prohibiting the kind of commission structure that was previously in place.
  • The finance option you chose was a Personal Contract Purchase (PCP), which is a prevalent form of vehicle finance. It functions similarly to a loan to assist you in obtaining a car or you may have opted for a Hire Purchase (HP) agreement, whereby you gradually cover the cost of the car through regular monthly payments.
  • The financial arrangement between your lender and the car dealership, which served as a credit broker, involved what is termed a ‘discretionary commission agreement’. Under this arrangement, the commission earned by the broker escalated with the increase in the interest rate that was charged to you.

Unfortunately it is unlikely you will be able to make a claim in these circumstances.

Many claims will target banks or financial institutions that have agreements with car manufacturers. However, you may be able to lodge a claim against car manufacturer brands.

Typically, you must complain to your provider within six years of the issue arising, or within three years of you becoming aware of the problem.

Yes, you may be able to claim for mis sold PCP on used cars, provided you entered into a PCP finance agreement to make the purchase and you can provide that you were mis sold the agreement.

Accurate as of 23/1/24

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