Car finance
What is car finance?
When you buy a new or used car, you might use a car finance agreement to do so. With these types of finance agreements, the consumer chooses a car – usually at a car dealership. The car dealership sells the car to the finance provider. The finance provider then owns the car. In return for making the monthly payments under the agreement, the finance provider allows the consumer to use the car. They are sometimes useful if you want to give the car back after a certain time or if you want to delay the decision to buy the car outright.
You might pay for a new or used car using a credit card or point of sale loan. If you’ve used this type of credit, you might be able to use something called “section 75” of the Consumer Credit Act 1974. Read our guidance on goods and services bought with credit.
There are three main types of finance agreement that people use.
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You hire goods by paying in instalments. Then, at the end of the agreement, you can make the final payment (sometimes known as the balloon payment or guaranteed minimum future value) and become the legal owner of the car. If you don’t want to take ownership of the car then you won't pay the final instalment and can return the goods.
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This is very similar to a hire purchase agreement – it essentially allows you to buy the car by paying in instalments. It differs in that there is an expectation that you will buy the goods outright and become the legal owner at the end of the agreement. However, most modern conditional sale agreements do contain options for you to return the car.
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The finance provider owns the car throughout and allows you to use it in return for payment. Ownership of the car doesn’t pass to you but remains with the hiring company.
Types of complaint we see
We see complaints from consumers who say:
- their car is faulty or not of satisfactory quality
- the car or the car finance has been mis-sold or mis-described
- they’re unhappy about charges that they’ve been asked to pay at the end of the agreement – such as excess mileage or damage charges
- the finance agreement was unaffordable, or they weren’t treated fairly when they were in financial difficulties
- they would like to exit their car finance agreement early because they’re in financial difficulties
- they believe that commission was not adequately disclosed or unhappy with the amount of commission paid from the lender to the broker who arranged their car finance
How to complain
Talk to your finance provider or credit broker first. They need to have the chance to put things right. They have to give you their final response within eight weeks for most types of complaint. If you’re unhappy with their response, or if they don’t respond, let us know.
Bringing a complaint to us is straightforward and won’t cost you anything. We’ll check your complaint is something we can deal with, and if it is, we’ll investigate.
Find out more about how to complain.
What we look at
To help us consider a complaint fairly, we’ll ask you to provide some information. We’ll make our decision about what happened using evidence provided by you, the financial business and any relevant third parties. In reaching a decision, we consider:
- the relevant law
- any regulations that applied at the time
- any industry codes of conduct in force at the time
Read more detail about what we look at for specific types of complaint.
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If your complaint is about a fault with your car, we’ll look at whether:
- a fault exists/existed
- the fault means the car was not of satisfactory quality at the time of supply
- your finance provider or the dealership has done anything to put things right
As the finance provider is the supplier of the car, they are liable for the quality of the car when it was supplied.
This is because the Consumer Rights Act 2015 implies a term into the contract that goods supplied under these types of agreements are of satisfactory quality.
For cars bought with credit cards or point of sale loans, these terms are implied into the purchase contract with the dealership. But because of section 75 Consumer Credit Act 1974, we can, subject to certain criteria, look at these complaints against the credit card or loan provider.
We think it’s fair to say that a reasonable person would expect the quality to be higher in a new car, than a cheaper, more roadworn car. And that a new car could be used and free from defects for a considerable period of time.
It’s unreasonable to expect a used and more roadworn car to be in perfect condition and it’s likely the car will show signs of wear and tear. But a finance provider might still be responsible if the car was sold with defects that a reasonable person wouldn’t expect on a car of that price, age and mileage.
Understanding satisfactory quality
When we investigate whether a car was of satisfactory quality, we’ll look at things like:
- the general state and condition of the car
- its safety
- whether it's free from minor defects
- the appearance and finish
- whether it's fit for its particular purpose
- its durability
If you’re bringing a complaint to us about the quality of the car, it’s helpful if you can provide us with any supporting evidence like:
- adverts for the car
- sales documentation
- photos or videos you may have taken
- breakdown reports
- job sheets or invoices for work that might have already been undertaken to try to fix the car
If lots of things have gone wrong, then a chronology of events setting out what happened and when is useful. But don’t worry if you don’t have all of this information – we can still look at your complaint.
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In some circumstances, the finance provider is liable for what is said by a credit broker or a supplier before you take out certain types of finance agreements. We can also look at some complaints about a mis-sale against the credit broker.
If you feel that you’ve been misled about a key feature of the car or the finance agreement, we’ll look at things like:
- what you say happened and what the dealer/broker says happened
- any information you were given about the car before you bought it including invoices, brochures, manuals, adverts, the car service and MOT inspection history
- relevant documents like the finance agreement and pre-contract information
- supporting evidence such as correspondence showing anything that may have been said leading up to and shortly after any agreement was entered into, for example, emails and text messages
If you bring a complaint like this to us, it’s helpful if you can provide us with any evidence like this that you may have. But don’t worry if you don’t have all of this information – we can still look at your complaint.
If we think something was said that wasn’t correct, or that you were misled into taking out the finance agreement or getting the car, we’ll think about the impact this has had on you and what you might have done differently.
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We have seen complaints about car finance commission paid by lenders to brokers on a range of car finance agreements.
Customers are contacting us because they think the way that their car finance agreement was arranged was unfair, or the commission wasn’t properly disclosed, and that it had an impact on the amount of interest they paid or the type of loan they received. They haven’t been able to resolve the complaint with the financial business, and so they get in touch with us to investigate what’s happened.
You can read more about this type of complaint on our page that sets out how to complain about car finance commission.
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Excess mileage charges
If your complaint is about excess mileage charges and you didn’t know that there was an annual mileage cap when you entered the agreement, we’ll investigate whether the finance agreement was mis-sold to you.
If you knew about the annual mileage cap, but don’t think those charges are fair, we’ll look at the circumstances in which the car was given back and what the agreement says about the annual mileage cap. We’ll also look at what was said at the point of supply and your specific circumstances in deciding whether it is fair and reasonable for you to pay all or part of the charge.
Damage charges
If your complaint is about damage charges being applied when you returned the car at the end of the agreement, we’ll look at things like:
- what your agreement says about how charges can be applied
- what you say about the damage or charges
- each individual damage charge and whether it was fair and reasonable for your finance provider to apply it – taking into account industry guidance and the age and mileage of the car when first hired and returned
- the quality of any inspection reports given to us by the business and any photos or videos you have
- whether the amount of the damage charge is proportionate to the damage/repair work needed, or whether a cheaper repair could be done
- any impact that a delay in collection or in a report being prepared post-collection, might have had
- whether you were given an opportunity to repair any damage before returning the car
Putting things right
Our general approach is that you should be put back in the position they would have been in if the problem hadn’t happened. We may also ask the business to compensate them for any distress or inconvenience you have experienced as a result of the problem.
The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how you lost out. The following examples give an idea of our approach.
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If we don’t think the car was of satisfactory quality, we’ll look at what may have been done already to put things right. If things haven’t been put right, we might say the finance provider should:
- repair the car if we think a repair is reasonable and will resolve the issue
- replace the car if there’s a suitable like-for-like replacement available
- give a price reduction
- allow you to give back the car and end the agreement – if we think that rejection of the car is reasonable
We might also suggest that you’re given compensation if:
- you haven’t had use of the car
- your use of the car has been impaired
- you’ve been caused distress and inconvenience
If you have incurred any costs relating to the complaint – for example storage costs – we’ll consider whether it’s reasonable for you to be reimbursed these costs.
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If we find that the car or the agreement has been mis-sold or mis-described, we’ll consider what impact this has had on you. We might ask the business to: If we find that the car or the agreement has been mis-sold or mis-described, we’ll consider what impact this has had on you. We might ask the business to:
- award you compensation to reflect any loss you’ve had by not getting what you were promised – like a particular feature on the car
- write off some or all of the charges under the agreement – if we think they weren’t properly brought to your attention
- end the agreement and take back the car – if we think you wouldn't have gone ahead with the transaction, or if it would be unreasonable to expect you to continue with the agreement
We might also suggest that you’re given compensation if:
- you haven’t had use of the car
- your use of the car has been impaired
- you’ve been caused distress and inconvenience
If you have incurred any costs relating to the complaint – for example storage costs – we’ll consider whether it’s reasonable for you to be reimbursed these costs.
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If we think the charge for excess mileage and/or damage applied at the end of the agreement is unfair or unreasonable, we may ask your finance provider to waive some or all of the charges.
Case studies
Useful resources
If you’re worried about money and finding it difficult to know where to start, the government-backed MoneyHelper service can help you find a way forward. Whether it’s living on a squeezed income, working out how to prioritise your bills and payments, or access to free, expert debt advice, they can help you take the first step towards getting on top of things.
StepChange Debt Charity offers free, flexible debt advice that is based on a comprehensive assessment of your situation and provide practical help and support for however long it’s needed.
Information for financial businesses
If you’re a business looking for information to help you resolve complaints or want to find out more technical information, you can find more detail about car finance in the business section of our website.
