FAQ

Frequently Asked Questions

What is PCP?

Personal Contract Purchase (PCP) is effectively a personal loan which allows buyersto spread the payments for a vehicle over a long period, typically two or three years.

However, unlike a normal personal loan, you won’t be paying off the full value of the car and you won’t necessarily own it at the end of the deal (unless you choose to pay the final balloon payment).

PCP is one of the more complex financial products available to help you purchase a car, but it can be broken down into three main segments: the deposit, the amount you borrow and the final balloon payment.

Why do dealers offer PCP finance?

Dealers use PCP finance to attract people who are looking to change their car every few years. Over 70% of new cars in the last several years were bought using PCP, making it the most widespread financial product in the market.

What Do I Need To Make A Car Finance Claim?

When starting a car finance claim you will need a copy of your car finance agreement, proof of address, and also proof of identification like your driving licence or passport.

What Would Qualify For Proof Of Address?

Bank or Building society or credit card statement (Less than 3 months old)
Utility bill – less than 3 months old

What If I Don’t Have The Paperwork To Make A Claim?

Car Finance Companies are obligated to keep records of all their customer’s transactions and dealings for at least 6 years.

How Do I Make The Claim Process As Quick As Possible?

The more details you can recall about your agreement, the faster the finance company can locate and verify you against their systems promptly.

This will also help avoid requests for further information which can delay a decision being made.

What is the FCAs role in mis-sold car finance?

The Financial Conduct Authority (FCA) regulates the financial services industry in the UK.

The FCA aims to make markets work well for individuals, for business, large and small, and for the economy as a whole.

This includes car finance which covers several types of financial products you can take out when purchasing a car.

Why is the mis-selling scandal only now coming to light?

The misconception around car finance is that the product being sold is a car.

This is only partly true. In fact, the main product that is being sold is a financial product which in this case is a loan.

The car is a red herring that serves as a distraction for the public eye away from this sector of credit broking meaning it has not been under as much scrutiny as, say, mortgages.

The concept of PCP itself is also relatively new, hence it took some time before authorities were able to sniff it out.

How is the deposit calculated?

Dealers offering PCP finance will typically want approximately 10% of the value of the car as an initial deposit. Customers pay the requested deposit on the car they want and then make monthly repayments until the end of the term.

How much will I have to borrow?

The amount you need to borrow depends on how much the finance company predicts the car will depreciate for the term of the deal (usually 24 or 36 months) minus the deposit you’ve put down.

You will pay this amount off during the deal, plus interest.

So, you are not paying off the full value of the car. Typical annual percentage rates (APRs) start in the range of 4%.

What happens at the end of the contract?

When the term ends, in order to keep the car you need to make a lump sum payment (aka: a balloon payment) in order to purchase the vehicle outright.

If you are not going to keep the car, you can return it back without any further payments.

Alternatively, you can use any equity you have in the deal if the car has maintained more of its value than expected to put down as a deposit on a new vehicle, via a new PCP deal.

How long does it usually take for a car finance claim to be paid out?

On average, it takes between 8 to 16 weeks from the date of acknowledgement to a final decision being made.

What happens if my claim is rejected?

Many claims that are rejected initially go on to be overturned by the Financial Ombudsman Service, but the process can last for several months.

How much money could I be entitled to?

Your compensation can differ depending on your original agreement but most claims involving PCP agreements will be worth several thousands of pounds.

Will the broker who sold me the deal be prosecuted?

Claims will be made against the lender of the finance only.

The broker of the PCP agreement is considered an agent of the lender so the responsibility is on the lender to ensure their brokers behave according to the standards set by the FCA.

Frequently Asked Questions

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