PCP (Personal Contract Purchase) car finance has been a popular way to drive new vehicles with manageable monthly payments. However, many drivers may have mis-sold their agreements due to hidden fees, lack of transparency, or unfair terms. If you’ve taken out a PCP deal, you must check whether you were mis-sold and take action if needed.
What Is PCP Finance and How Does It Work?
PCP finance is a type of car finance where you pay lower monthly instalments over a fixed term. At the end of the agreement, you can either return the car, trade it in, or make a balloon payment to own it. Many drivers choose PCP because of its flexibility and lower upfront costs compared to traditional loans.
Lenders set the monthly repayments based on the car’s predicted future value at the end of the term. This value, known as the Guaranteed Minimum Future Value (GMFV), affects how much you pay each month. If the car is worth more than the GMFV at the end, you can use the equity towards a new vehicle.
Signs You Might Have Been Mis-Sold PCP Finance
1. You Weren’t Told About Commission Fees
Many car dealers receive commission from lenders for arranging PCP finance deals. The Financial Conduct Authority (FCA) found that some lenders used a “discretionary commission” model, where dealers could increase interest rates to earn higher commissions. If you weren’t informed about commission payments, you may have been mis-sold your finance deal.
- In 2021, the FCA banned discretionary commission models after uncovering widespread unfair practices in car finance sales.
- A study found that some drivers paid £1,100 more in interest due to hidden commissions (FCA, 2021).
- If your lender failed to disclose commission details, you could be entitled to compensation.
2. You Weren’t Given Full Cost Breakdown
Dealers must provide clear and accurate information about the total cost of your finance agreement. If you weren’t shown a full breakdown of interest rates, monthly payments, and balloon payments, your lender may have breached FCA guidelines.
- The FCA’s rules state that lenders must provide “clear, fair, and not misleading” information (FCA, 2021).
- A Citizens Advice report found that 42% of drivers didn’t fully understand their PCP finance terms (Citizens Advice, 2022).
- If your dealer rushed through the paperwork without explaining the full costs, your agreement may be unfair.
3. You Were Pressured Into a PCP Deal
Sales staff should not pressure customers into taking finance agreements they don’t fully understand. Some dealers push PCP finance over other options because it’s more profitable for them. If you felt pressured or misled, you could have grounds for a complaint.
- In 2022, an FCA investigation revealed that 30% of drivers felt rushed into signing car finance agreements (FCA, 2022).
- Car finance complaints increased by 40% between 2020 and 2023, highlighting growing concerns (Financial Ombudsman, 2023).
- If you were misled into believing PCP was your only option, you may have been mis-sold.
How to Check If You Can Claim Compensation
If you suspect you were mis-sold PCP finance, you need to gather your contract details and look for key signs of mis-selling. Here’s a simple checklist to follow:
Review your finance agreement – Check if commission details and full cost breakdowns were disclosed.
Look at your interest rate – Compare it with similar deals to see if you were overcharged.
Check lender correspondence – Any misleading information from your lender could support a complaint.
Speak to a financial expert – A regulated claims management company or solicitor can help assess your case.
If you find any red flags, you should file a complaint with your lender. Under FCA rules, they have eight weeks to respond before you can escalate to the Financial Ombudsman Service (FOS). If your claim is upheld, you could receive a car finance refund, covering excess interest, hidden fees, and unfair charges.
How to Make a PCP Finance Mis-Selling Claim
Step 1: Contact Your Lender
Write to your finance provider and explain why you believe you were mis-sold. Include details about hidden commission, unclear costs, or misleading sales tactics.
Step 2: Escalate to the Financial Ombudsman
If your lender rejects your claim or fails to respond within eight weeks, take your case to the FOS. The ombudsman reviews complaints for free and can order compensation if they find in your favour.
Step 3: Consider Legal Action
For complex cases, you may need legal assistance to challenge unfair finance agreements. Many claims management firms operate on a no-win, no-fee basis, making it easier to fight back.
Final Thoughts
If you were mis-sold PCP finance, you could be owed thousands in compensation. The FCA is cracking down on unfair practices, meaning more drivers may be eligible for refunds. Don’t wait—check your agreement, gather evidence, and file a claim if you believe you were misled.
Need help with your claim? Speak to a financial advisor or visit the FCA’s website for more guidance.