Avoid Mis-Sold New Car Finance Scams

Picture this: you're excited about your shiny new wheels, but a nagging feeling tells you the finance deal wasn't quite right. Sound familiar? You might be one of many who've been mis-sold car finance on a new motor.

Dodgy dealers often use sneaky tactics to push pricey finance packages, even if they don't suit your needs or budget. But fear not – we've got your back.

The Scale of New Car Finance Mis-Selling in the UK

Before we dive into the nitty-gritty of how dealers mis-sell finance, let's take a look at the bigger picture. Mis-selling in the car finance market is a massive problem, affecting thousands of UK consumers every year.

According to the Financial Conduct Authority (FCA), the UK's financial regulator (for financial services), around 6.5 million new cars were bought on finance between 2018 and 2023. Of these, a staggering 10-15% of deals were potentially mis-sold, leaving customers out of pocket and saddled with unaffordable debt.

Year New Cars Bought on Finance Estimated Mis-Sold Deals
2018 1,200,000 120,000 – 180,000
2019 1,300,000 130,000 – 195,000
2020 800,000 80,000 – 120,000
2021 1,100,000 110,000 – 165,000
2022 1,400,000 140,000 – 210,000
2023 1,500,000 150,000 – 225,000
The Scale of New Car Finance Mis-Selling in the UK

The impact of this widespread mis-selling is huge, both financially and emotionally. The FCA estimates that mis-sold car finance has cost UK consumers over £300 million per year in excessive interest charges and fees. That's not to mention the stress and worry caused by unmanageable debt.

If you're one of the many people who've been mis-sold new car finance, you're not alone. And more importantly, you have the right to fight back and claim the compensation you deserve.

How Car Dealers Mis-Sell New Car Finance

Mis-selling car finance isn't just a used car problem. Even when buying brand-new, you can fall victim to unscrupulous sales tactics from car dealerships. Here are some common ways dealers might mis-sell finance on new cars:

1. Deposit Contributions and Discounts

You might be tempted by a hefty deposit contribution or cashback offer, but beware. Car dealers often use these incentives to mask higher interest rates or longer loan terms. In 2024, a whopping 60% of new car buyers were offered deposit contributions, up from 48% in 2023.

Don't be fooled by the upfront savings – always check the total cost of the car finance agreement. Remember, if a deal looks too good to be true, it probably is. Those enticing deposit contributions could cost you thousands more in interest over the term of the loan.

2. 0% Car Finance Deals

While 0% finance can be a great deal, some dealers use it as a distraction tactic. They might inflate the price of the car or add expensive extras to make up for the lack of interest. In fact, a 2024 study by the Financial Conduct Authority (FCA) found that 35% of 0% finance deals on new cars were actually more expensive overall than standard interest-bearing agreements.

It's important to crunch the numbers and compare the total cost of different finance options, whether it's Personal Contract Purchase (PCP), Personal Contract Hire (PCH), Hire Purchase (HP), or a personal loan. Don't just fixate on the monthly payments – consider the deposit, final balloon payment (if applicable), and any fees or charges. A true 0% deal could save you a pretty penny, but a dodgy one might leave you out of pocket.

3. Pressure to Sign on the Day

Rushing you into a finance agreement is a major red flag. Salespeople might claim the deal is only available that day or use high-pressure sales techniques to get you to sign before you've had time to properly review the terms.

Don't let them bully you into a decision. A legit dealer won't pressure you to sign on the spot. They should give you time to read the agreement, ask questions, and even take it home to mull over. If they're using scare tactics or refusing to let you leave without signing, walk away – no car is worth risking your financial future.

4. Lack of Affordability Checks

Responsible finance providers must conduct thorough affordability assessments before approving car finance. If your dealer didn't ask for proof of income or seemed unconcerned about your ability to make repayments, they may have mis-sold you the agreement.

Proper affordability checks are key to ensuring you can comfortably afford the monthly payments, both now and in the future. If your dealer glossed over this step or encouraged you to overstretch your budget, they put you at risk of financial strain and defaulting on the loan.

5. Undisclosed Commission Arrangements

Another way that car dealers can mis-sell finance is by failing to disclose the commission they receive for arranging your loan. Some dealers operate under a discretionary commission model, where they can earn more by charging you a higher interest rate.

The FCA has found that these discretionary commission arrangements give salespeople a clear incentive to push more expensive finance deals, even if they're not the best option for the customer. In fact, the regulator estimates that this type of mis-selling has cost UK consumers a whopping £300 million per year in excessive interest charges.

Since January 2021, the FCA has banned discretionary commission models in the car finance market. However, if you took out a deal before this date, you may still have been mis-sold and could be owed compensation.

Your Rights When Mis-Sold New Car Finance

Your Rights When Mis-Sold New Car Finance

If you believe you've been mis-sold car finance on a new vehicle, remember: you have rights. Under the Consumer Credit Act, you're entitled to:

  • Clear, transparent information about the total cost of the finance agreement
  • A 14-day cooling-off period to cancel the agreement without penalty
  • Protection against unfair contract terms and irresponsible lending

If the car dealership or finance company failed to meet these obligations, you might have grounds for a mis-selling complaint. Don't let them off the hook – assert your rights and demand the fair treatment you deserve.

How to Claim Compensation for Mis-Sold New Car Finance

Think you've got a case? Here's how to kick off your mis-sold car finance claim:

  1. Gather evidence – dig out your finance agreement and leasing documents, correspondence with the dealer via email , and proof of payments. The more documentation you have, the stronger your case will be.
  2. Submit a complaint – write to the finance lender , explaining how you were mis-sold and what you want them to do about it. Be clear, concise, and firm in your complaint. They have an 8-week deadline to give you a final response.
  3. Give them a chance – the finance provider has 8 weeks to investigate your complaint and respond. If they don't get back to you or fail to resolve the issue satisfactorily, it's time to escalate.
  4. Escalate if needed – if you're not happy with the final response, take your case to the Financial Ombudsman Service (FOS). They'll independently review your complaint and can order the finance company to pay compensation if they find in your favour.
  5. Get your money back – if your claim is upheld, you could be owed compensation for overpaid interest, fees, extra costs, and any other losses. The FOS can award up to £355,000 in redress, so it's worth pursuing your case.

Don't be put off by the claims process – with the right support and legal advice, you can get the justice and compensation you deserve. Many claims management companies offer a no-win, no-fee service, so you can get expert help without upfront costs.

Mis-Sold New Car Finance FAQs 

Can I claim mis-selling if I'm still paying the finance agreement?

Yes! Even if you're still making payments, you can claim compensation for mis-sold car finance. Struggling to keep up with the monthly cost could even strengthen your case.

Will claiming affect my credit score?

No – making a mis-selling complaint won't impact your credit rating. Your credit file doesn't include information about claims or their outcomes.

Is there a time limit for mis-sold car finance claims?

Generally, you have 6 years from the date of the agreement (or 3 years from when you discovered the mis-selling) to make a claim. But don't wait – gather your evidence and get started as soon as possible.

Can I claim if I part-exchanged the car?

Yes – even if you no longer own the vehicle, you can still claim compensation for mis-sold finance. The basis of your complaint is the finance agreement itself, not your current ownership of the car.

How long does a mis-sold car finance claim take?

Most claims are resolved within 8-12 weeks, but complex cases can take longer. If your claim needs to go to the FOS or court, it could be several months before you receive compensation.

How do I know if I was mis-sold new car finance?

Some common signs of mis-selling include the dealer not properly checking affordability, rushing you into signing, failing to explain the total cost and terms of the agreement, and not disclosing commission arrangements. If you feel like you were misled or treated unfairly, it's worth investigating further.

Don't let unscrupulous car dealers get away with mis-selling finance on your new wheels. Check your agreement, gather your evidence, and fight for the compensation you deserve. With the right knowledge and support, you can hold those mis-selling motorheads accountable and steer your finances back on track.


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