Which Vehicle Finance Agreements Could Be Included in a Mis-Sold Car Finance Claim/Complaint?
Millions of UK drivers have used finance to buy a vehicle over the last two decades. Cars, vans, motorbikes, motorhomes and campervans are often bought through finance agreements arranged by dealerships or brokers.
Recent scrutiny of the motor finance market has raised concerns about whether some customers were given clear information about commission, interest rates and the overall cost of borrowing. The FCA banned discretionary commission arrangements in motor finance in January 2021 because they could create an incentive for brokers to increase the interest rate a customer paid.
Most current motor finance complaints focus on Personal Contract Purchase, Hire Purchase and Conditional Sale agreements arranged through dealerships or brokers. Other finance products may be relevant in some circumstances, but they are less commonly linked to the issues currently under review.
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Why Are Some Vehicle Finance Agreements Being Reviewed?
Concerns about some motor finance agreements focus on whether customers were given enough information about broker commissions and whether those commissions influenced the interest rate charged.
Some historic arrangements allowed brokers or dealerships to earn more commission when a customer paid a higher interest rate. These are often called discretionary commission arrangements, or DCAs.
Complaints currently being reviewed relate to agreements during this date range:
- Earliest date: 2007
- Latest date: November 2024 or 2021
You may have grounds to complain depending on the facts of your agreement. The FCA’s review has looked at regulated motor finance agreements across this historic period.
PCP Finance
Personal Contract Purchase, commonly known as PCP, is one of the most common vehicle finance products in the UK.
With a PCP agreement, you usually:
- Pay an initial deposit
- Make monthly payments over an agreed term
- Choose whether to return the vehicle, part-exchange it, or pay a final balloon payment to own it
PCP agreements are often discussed in relation to mis-sold car finance complaints because they were widely used by dealerships and brokers.
Some historic PCP agreements may have included commission arrangements that were not clearly explained. In some cases, the commission may have been linked to the interest rate charged.
Common PCP Complaint Questions
- Was commission disclosed clearly?
- Was the role of the dealership or broker explained?
- Was the interest rate explained properly?
- Were the total borrowing costs clear?
- Were alternative finance options discussed?
Hire Purchase
Hire Purchase, often called HP finance, is another common way to fund a vehicle purchase.
Unlike PCP, HP usually does not include a large optional final payment. Your monthly payments are designed to cover the cost of the vehicle over the finance term.
At the end of the agreement, ownership transfers to you once all payments have been made.
HP agreements may be relevant where commission arrangements, interest rates or borrowing costs were not explained clearly.
Typical Features of HP Finance
- Fixed monthly payments
- No balloon payment
- Ownership at the end of the agreement
- Common for new and used vehicles
Conditional Sale Agreements
Conditional Sale is very similar to Hire Purchase. The main difference is that you agree to buy the vehicle from the beginning of the agreement rather than choosing whether to buy it later.
You agree to buy the vehicle from the start. Ownership usually transfers automatically once the final payment has been made.
Many people do not realise they entered into a Conditional Sale agreement because the payment structure can look similar to HP finance.
Where the agreement was arranged through a dealership or broker, it may be worth reviewing whether commission, fees and borrowing costs were explained clearly.
Personal Loans Used for Vehicle Purchases
Some buyers use an unsecured personal loan from a bank or lender to buy a vehicle.
Most current motor finance commission complaints concern dealership-arranged finance rather than personal loans taken directly from a bank.
Whether a complaint may be possible depends on how the finance was arranged, who introduced the agreement, and what information was provided at the time.
Leasing Agreements
Leasing allows you to use a vehicle for a fixed period without owning it.
Common leasing products include Personal Contract Hire and Business Contract Hire.
Personal Contract Hire
Personal Contract Hire, or PCH, is designed for private individuals who want fixed monthly payments and do not plan to own the vehicle.
Business Contract Hire
Business Contract Hire, or BCH, is designed for companies and business users.
Leasing agreements are generally not the main focus of current motor finance commission complaints, which have centred mainly on PCP, HP and Conditional Sale agreements. However, you should still review the documents you received when entering into any finance arrangement.
Finance Lease Agreements
Finance leases are mainly used by businesses rather than private drivers. They are not usually the focus of current motor finance complaints.
The customer usually pays for the vehicle’s depreciation over the agreement term. There may also be options to extend the lease or receive a share of the sale proceeds at the end.
These agreements are more specialised, but they can still involve finance intermediaries, brokers and commission structures. Any commission or cost information should be clear and transparent.
Which Vehicles Could Be Included?
Cars
Cars make up a large share of UK vehicle finance agreements.
If you bought a new or used car through a dealership using PCP, HP or Conditional Sale finance, you may wish to check whether your agreement included a commission arrangement.
Vans
Van finance is common for businesses, self-employed drivers and personal users.
Many vans were funded through PCP, HP or Conditional Sale agreements. Some van finance agreements may warrant review depending on how the finance was arranged.
Motorbikes
Motorbike finance is often arranged through dealerships or brokers.
Where a motorbike was bought using PCP, HP or Conditional Sale finance, similar questions may apply around commission disclosure and interest rate transparency.
Motorhomes and Campervans
Motorhomes and campervans often involve higher-value finance agreements.
Many buyers used dealership-arranged finance, which means these agreements may be relevant where commission or borrowing costs were not explained clearly.
Electric Vehicles
Electric vehicle finance has grown in recent years.
The key issue is not whether the vehicle was electric, petrol or diesel. What matters is the type of finance agreement, how it was arranged, and whether the costs and commission were explained clearly.
Which Agreements Are Most Commonly Linked to Complaints?
The finance agreements most often discussed in relation to mis-sold car finance complaints are:
Personal Contract Purchase
Hire Purchase
Conditional Sale agreements
These products were commonly arranged through dealerships and brokers, where some commission models may have influenced the cost of borrowing.
How to Check If Your Agreement May Be Relevant
You may wish to review your agreement if:
- You bought a vehicle using finance arranged through a dealership or broker
- The agreement was entered into between 6 April 2007 and 28 January 2021
- You were not told about commission
- You were not told the broker or dealership could receive commission
- You believe your interest rate may have been affected by commission
- You still have paperwork relating to the agreement
Useful documents include:
- Finance agreements
- Settlement statements
- Vehicle purchase invoices
- Finance provider letters or emails
- Broker or dealership paperwork
A review of your agreement may help determine whether further investigation is appropriate.
Frequently Asked Questions
Can I make a complaint for vehicle finance on a used car?
Potentially. Both new and used vehicle finance agreements may be relevant depending on the agreement type, how the finance was arranged, and what was disclosed at the time.
Is PCP more likely to qualify than HP?
PCP agreements are often discussed because they were widely used. HP agreements may also be relevant depending on how the finance was arranged and whether commission was explained clearly.
Can I make a claim for van finance?
Some van finance agreements may be eligible for review if they were arranged through a dealership or broker and meet relevant criteria.
Can motorbike finance be included in a complaint?
Potentially. This may apply where the finance was arranged through a dealership or broker and the commission or borrowing costs were not made clear.
Do I need to still own the vehicle?
Not necessarily. The issue usually relates to the finance agreement itself, not whether you still own the vehicle.
What documents do I need?
The finance agreement is usually the most useful document. Settlement figures, invoices and lender correspondence may also help.
What is a discretionary commission arrangement?
A discretionary commission arrangement was a commission model that allowed some brokers or dealerships to earn more commission by increasing the interest rate charged to a customer. The FCA banned these arrangements in motor finance from 28 January 2021.
Can I complain if my finance agreement has ended?
In some cases, historic finance agreements can still be reviewed even if the agreement has ended or the vehicle has been sold. Whether you may have grounds to complain depends on the facts of your agreement.
If you're unsure whether your finance agreement may be relevant, Mis-Sold Expert can help you understand the complaints process and review the information available about your agreement. Whether you have grounds to make a complaint will always depend on your individual circumstances.
This article is for general information only and does not constitute legal or financial advice. Whether you may have grounds to make a complaint depends on the facts of your individual circumstances and the terms of your finance agreement.
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