Car finance has become the go-to option for many UK drivers looking to get behind the wheel of a new vehicle without paying the full price upfront. However, in recent years, concerns have emerged about the way some finance agreements—particularly Personal Contract Purchase (PCP) and Hire Purchase (HP) deals—were sold to consumers. Many drivers are now questioning whether they were misled, misinformed, or even pressured into agreements that weren’t in their best interests.
If you’ve ever signed a car finance deal and felt uncertain about the terms, or if you suspect that vital information was withheld, you may have been mis-sold your agreement. But how can you tell? And what can you do about it?
Understanding Mis-Sold Car Finance
Being mis-sold a car finance agreement doesn’t necessarily mean that the contract itself was illegal or invalid. Rather, it means that the way the deal was presented to you may not have been fair or transparent. Lenders and dealerships have a duty to ensure that customers fully understand the financial commitments they’re making, including the long-term costs, interest rates, and any additional fees. If they fail to do so, the agreement could be considered mis-sold.
The Financial Conduct Authority (FCA) has been investigating car finance mis-selling, with particular scrutiny on hidden commission structures, lack of clear affordability checks, and misleading explanations of key terms. If any of these apply to your deal, you could be eligible to claim compensation or even have part of your finance agreement refunded.
Were You Told About Commission?
One of the biggest scandals in the car finance industry revolves around undisclosed commission payments. Many dealerships and brokers received commissions from lenders when arranging finance agreements, but they didn’t always tell customers about this.
In some cases, dealers had the power to increase the interest rate to boost their commission, meaning customers ended up paying far more than necessary—without even knowing it. The FCA has criticised this practice, stating that customers should have been fully informed about any commissions involved and how they might affect their repayment costs.
Ask yourself:
- Did the dealer mention they were earning commission from your deal?
- Did you feel pressured into accepting a higher interest rate without a clear reason?
- Were you given alternative financing options, or was PCP or HP pushed as the only choice?
If the commission aspect wasn’t disclosed to you, you may have been mis-sold your agreement.
Did You Receive a Proper Affordability Check?
Lenders and dealerships must assess whether a finance agreement is genuinely affordable for you. This doesn’t just mean looking at your income—it means considering your other financial commitments and ensuring that the repayments won’t cause financial hardship.
If your finance deal was approved without a thorough affordability check, or if you were encouraged to take on more debt than you could reasonably manage, this could indicate mis-selling.
Think back to when you applied for finance:
- Did the dealer ask about your financial situation, or was the application rushed through?
- Were you given a breakdown of all the costs, including interest and optional extras?
- Were you encouraged to take on a longer loan term just to make the monthly payments lower?
A legitimate lender should ensure that your deal is appropriate for your financial circumstances. If they didn’t, there’s a strong chance your finance was mis-sold.
Was PCP or HP Explained Clearly?
Many consumers sign up for PCP or HP finance without fully understanding how they work. These agreements involve specific terms, balloon payments, mileage limits, and end-of-contract conditions, all of which should be clearly explained before you sign.
A common issue in mis-sold finance cases is that salespeople failed to explain these crucial details. For instance, some customers were led to believe they would own the car at the end of a PCP agreement—only to discover they had to pay a large final lump sum (the “balloon payment”) to actually take ownership. Others were unaware that exceeding mileage limits could result in hefty charges.
Ask yourself:
- Did you fully understand how PCP or HP worked before agreeing to the deal?
- Were you misled about ownership rights at the end of the agreement?
- Were key terms, such as excess mileage penalties or final payments, glossed over?
If you weren’t given a fair and transparent explanation of your agreement, you could have been mis-sold.
Were You Pressured Into Signing?
Sales tactics in the car finance industry aren’t always as ethical as they should be. Some dealerships use high-pressure tactics to get customers to sign finance deals quickly, often without giving them the chance to compare other options.
If you were made to feel rushed, told that an offer was only available for a limited time, or pressured into accepting a deal that didn’t quite feel right, that’s a red flag.
Think about your experience at the dealership:
- Did you feel like you had time to read through the agreement carefully?
- Were you told that the deal was “only available today” to push you into signing?
- Did the salesperson brush off your concerns or fail to answer your questions properly?
Car finance agreements should be made with informed consent, not under duress. If you were pressured into a deal, you may have grounds to challenge it.
What Can You Do If You’ve Been Mis-Sold?
If you suspect that your car finance agreement was mis-sold, you don’t have to just accept it. There are steps you can take to seek compensation or even reclaim some of the money you’ve overpaid.
- Gather Your Documents – Find copies of your finance agreement, any emails or paperwork from the dealership, and any notes you made about your experience.
- Check for Signs of Mis-Selling – Compare your agreement to the issues mentioned above. If commission wasn’t disclosed, affordability checks were skipped, or you were misled about the terms, you could have a case.
- Raise a Complaint – The first step is usually to complain to the finance provider directly. They are required to investigate and respond within eight weeks.
- Take It Further – If your finance provider doesn’t respond satisfactorily, you can escalate your case to the Financial Ombudsman Service (FOS). They can step in and review your complaint independently.
- Get Professional Help – If you want expert guidance, companies like Reclaiming Car Finance specialise in helping UK drivers recover money from mis-sold car finance deals. They can handle the process for you, ensuring you get the best possible outcome.
Conclusion
Mis-sold car finance is a widespread issue that has affected countless drivers across the UK. If you were misled about commissions, affordability, or the terms of your agreement, you may be entitled to compensation. The key is recognising the signs, gathering the right evidence, and taking action.
If you believe you’ve been mis-sold a PCP or HP finance deal, Reclaiming Car Finance can help you navigate the claims process and fight for the compensation you deserve. Visit reclaimingcarfinance.co.uk to start your claim today.
