Understanding Mis-sold Car Finance Claims

A recent investigation by the Financial Conduct Authority (FCA) has uncovered extensive evidence of mis-selling across various types of UK car finance agreements. Mis-selling happens when a buyer is not provided with all the essential information needed to assess if the contract is financially sound or offers good value for money.

If a salesperson failed to provide complete details about your finance agreement, misled you, gave poor advice, or neglected to inform you of any commissions or interest charges, you may be eligible to claim for a mis-sold car finance agreement.

This right to claim applies to both personal contract purchase (PCP) and hire purchase (HP) finance agreements, covering any financed vehicle, whether new or used.

The Financial Conduct Authority (FCA) reports that commission was paid on 95% of UK car finance agreements, with an estimated 40% potentially mis-sold. In a recent article, a car dealer admitted, “frankly, we were getting away with murder. We weren’t treating customers fairly and were, in effect, charging them to earn us money.”

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Who Can Claim Compensation for Mis-sold Car Finance?

You may be eligible to claim for mis-sold car finance if the salesperson did not present all finance options, failed to fully explain contract details and interest rates, did not conduct affordability checks, or neglected to disclose any commission they would receive. The law requires the lender or dealership to demonstrate that they acted legally at every stage of the process. If they cannot provide this proof, you may be entitled to reclaim money on your car finance agreement.

Mis-sold car finance claims can be made for all of the following types of car finance agreements:

You may be eligible to claim if your car was purchased using a personal contract purchase (PCP)
You may be eligible to claim if your car was purchased using a hire purchase agreement (HP)
You may be eligible to claim for all types of vehicles, including cars, vans, trucks, and motorcycles
You may be eligible to claim for both new or second-hand vehicles purchased through finance
Claims can be made for agreements that are still active, and payments are being made.
Claims can be made for agreements that have ended, and the vehicle has been paid off
You can claim for multiple vehicles at the same time
You can claim even if the vehicle was repossessed.

How Do I Know If I Was Mis-sold Car Finance?

You may be able to claim for mis-sold car finance if you bought a car or motor vehicle through PCP or HP finance between April 2007 and 28th January 2021, and the finance agreement was mis-sold.

Your car finance agreement may have been mis-sold if:

The car salesperson did not inform you that they would receive a commission from the lender for setting up the financial agreement.
The car salesperson did not inform you of all the finance options available, including explaining the differences and responsibilities of each type of product.
The car salesperson did not inform you, with complete transparency, of the interest rates charged for all finance options and how they may differ.
The car salesperson did not offer the best interest rate available to you
The car salesperson did not adequately explain the details of the financial contract they sold to you, including the Terms and Conditions.
The car salesperson did not conduct adequate affordability checks or talked you into an unaffordable finance agreement.
The car salesperson used high-pressure sales tactics or did not give you adequate time to consider the agreement. It’s the lender or car dealership’s responsibility to prove that they did all of these adequately. If they can’t prove they did all of them, you’ll be entitled to claim for mis-sold car finance.

How Much Money Could I Reclaim For My Car Finance Agreement?

The exact amount of compensation you may be able to claim for a mis-sold car finance agreement will be dependent on several factors, including:
The size of the car finance loan – generally, the larger the loan, the more you’ll be owed and able to claim back
The length of your car finance agreement – you’ll be owed more if you’ve been paying the loan for longer
The interest rate you paid and the difference between the rate quoted and the rate you should have paid.

What Is The Average Payout For A Mis-sold Car Finance Refund?

The average compensation for a mis-sold car finance claim is estimated to be around £1,600. In some cases, refunds for mis-sold car finance can be as much as £10,000. How To Calculate The Amount Of Money You May Be Owed For Car Finance Based on the landmark case between Mrs Young Vs Black Horse, the compensation pay-out has been calculated by deducting the difference between the amounts that should have been quoted when the car was purchased and what was actually charged.

The amount you may be able to reclaim will be the difference between these two amounts — the amount you should have been charged if a competitive and fair interest rate had been presented versus the amount in your agreement. In essence, your claim will be for the amount of overpaid interest. In addition, the Financial Ombudsman Service awards a further 8% interest on the value of the overpayment. However, in most cases, this is difficult to do as you will not know the interest rate you should have been charged. This is why the FCA’s ruling on the amount of compensation you may be due is so important.