What Is Mis-sold Car Finance?

Mis-sold car finance refers to the practice of lenders or dealers selling car finance agreements to customers without providing all the details.

Failing to provide full and accurate information about the terms, conditions, or costs associated with the loan is a clear case of mis-selling. In this article, we will explore what is mis-sold car finance, how to identify if you have been mis-sold and the steps to take if you are a victim of mis-selling.

What is Car Finance?

Car finance refers to a range of financial options that allow consumers to borrow the money that is needed to buy a new vehicle or lease it before having the option to buy it outright, by spreading the cost over a period.

Some of the most common financial options include:

Personal Contract Purchase (PCP)

Personal Contract Purchase (PCP) is a popular financing option where you pay a deposit followed by monthly payments. At the end of a fixed term, usually three to five years, you have the option to own the car outright by making a final balloon payment. If you don’t want to fork out the outstanding balance you can either return the car and walk away, or trade it in, putting it towards the deposit on a new PCP arrangement.

Hire Purchase (HP)

Hire Purchase (HP) involves paying an initial deposit, then making fixed monthly payments over a set period, which can be up to five years. Once all payments are made, you own the car. There are usually no large final payments to worry about, but the total cost you repay is likely to be higher than using other options.

Personal Contract Hire (PCH)

With Personal Contract Hire (PCH) or car leasing, you hire a new car for a number of years before returning it at the end of the lease period. Like other finance agreements, you usually pay a non-refundable deposit and monthly repayments. It is likely you will be able to add servicing plans to your deal to ensure you won’t be faced with any fines if the car is not in an acceptable condition.

What Is Mis-sold Car Finance?

Mis-sold car finance occurs when a finance agreement is sold to a consumer in a misleading or unethical manner. This can involve failing to provide full or accurate information, not disclosing crucial terms regarding the agreement, or using high-pressure sales tactics.

Common Scenarios of Mis-sold Car Finance

High-pressure sales tactics employed by the lender or dealer – Feeling rushed or pressured to sign the agreement without ample time to consider can indicate mis-selling. ‘Hard sell’ tactics that create a sense of urgency can lead to poor decision-making.

Failure to conduct thorough affordability assessments – Not ensuring that the agreement is financially suitable for the consumer is another indication of mis-selling. Lack of suitability can lead to financial difficulties throughout the course of the agreement, resulting in debt or negative credit scoring.

Non-disclosure or inadequate explanation of fees, including interest rates – Discovering hidden fees or charges after signing the agreement suggests that the finance was mis-sold. All costs should be disclosed up front, including any commissions involved in the agreement.

The terms and conditions of the agreement were not fully explained – If the lender or dealer did not clearly explain the terms of the agreement or if you felt confused about the details, this is a major warning sign. Transparency is crucial in any financial agreement.

Discrepancies in documentation – If there are any differences between what was verbally agreed upon and what was written in the contract, this can be a sign of mis-selling. Always ensure that the written contract matches what was agreed.

Steps to Take if You Suspect Mis-selling

In January, the Financial Conduct Authority (FCA) announced a major investigation into motor finance agreements. The investigation’s aim is to determine if motorists may be owed compensation due to excessive charges on vehicle finance agreements, particularly before the 2021 ban on discretionary commission arrangements.

At Barings Law, we have been diligently working on mis-sold car finance claims for years, working with the finance providers and the courts to come to an appropriate outcome for our clients. We believe the FCA’s decision will significantly aid our efforts. In addition to pursuing mis-selling claims, we can also investigate potential affordability complaints, offering our clients more than one route to claim compensation.

Claims for affordability complaints are now settling at a rapid rate, with compensation awards for our clients averaging £5,181. These settlements have also included the removal of negative credit marks and interest write-offs.

Update August 2024: On July 30, 2024, the FCA released a further statement extending the deadline for motor finance firms to respond to complaints and the outcome of the investigation. The FCA has proposed extending the resolution deadline from September 2024 to the end of May 2025. Motor finance firms have also been given until at least December 4, 2025, to provide a final response to complaints. For the full update, please click here.

If you believe you have been mis-sold your car finance agreement, you may be eligible to submit a claim with Barings Law. Our expert team specialises in financial mis-selling, and we’re here to help you navigate the complexities of your case.

What’s more, your mis-sold car finance claim will be carried out on a no-win no-fee basis, meaning there is no financial risk to you for making your claim. If we do not win your case for you, you won’t pay us a penny for our services.

All you need to do is fill in the form by clicking the button below. Our customer service team will obtain the documentation you have gathered, most importantly your finance agreement, so that our dedicated legal team can get to work investigating your case.

They will then begin negotiating with your lender or dealership in an effort to claim compensation for the mis-selling of your motor finance agreement. Throughout the process, we will keep you informed, providing updates on our progress and seeking your input on key decisions such as accepting or rejecting any potential pre-court settlements that we may receive.

Pursue Legal Action with Barings Law

If negotiations with the lender or dealership prove unsuccessful, Barings Law will not hesitate to pursue further legal action on your behalf. Our experienced solicitors are well-versed in handling cases related to mis-selling, and we will work tirelessly to fight for your best interests in court.

With Barings Law by your side, you can trust that your case will be handled with the highest level of expertise and professionalism, giving you the best possible chance of securing a favourable outcome.