Your Legal Rights on PCP Car Finance Claims
PCP (Personal Contract Purchase) finance has become one of the most popular ways to buy cars in the UK. However, many agreements contain hidden commission charges and unfair terms that could lead to a legal claim. If you’ve taken out a PCP deal, you may be entitled to compensation.
What is PCP Car Finance?
PCP is a type of car finance that spreads the cost over a fixed term. You pay an initial deposit, followed by monthly payments, with a large balloon payment at the end. If you don’t pay the balloon payment, you must return the car.
Many borrowers don’t realise that dealers often earn commission from lenders. This commission is sometimes added as an undisclosed charge, inflating interest rates. In some cases, customers have overpaid by thousands due to hidden fees.
Why Are PCP Car Finance Claims Happening?
PCP claims arise because lenders failed to disclose commission structures properly. The Financial Conduct Authority (FCA) found that many agreements contained hidden commissions that led to inflated costs. Some lenders deliberately increased interest rates to boost dealer commissions, which is now considered unfair.
If you were affected, you could be entitled to compensation. The FCA has been investigating these practices and may introduce consumer redress schemes. Many financial firms have already received complaints, and successful claims are growing.
Who Can Make a PCP Car Finance Claim?
You may have a claim if you took out a PCP agreement between 2007 and 2021. If the dealer didn’t disclose commissions or your interest rate was manipulated, you could seek a refund. The average claim ranges from £1,000 to £10,000, depending on the overpayment.
PCP claims UK cases are rising as more consumers realise they were mis-sold finance agreements. The Financial Conduct Authority (FCA) is closely monitoring the situation, and lenders could be forced to compensate affected customers. If you suspect you’ve overpaid due to hidden commissions, now is the time to check your agreement.
How to Start a PCP Car Finance Claim
- Gather Your Finance Agreement – Check if the contract mentions commissions or variable interest rates.
- Contact the Lender – Raise a complaint directly with the finance company. If they reject it, escalate to the Financial Ombudsman Service (FOS).
- Consider a Claims Firm – If you prefer not to handle the process yourself, a regulated claims company can assist.
How Much Compensation Can You Get?
Compensation varies depending on the interest overpaid. Some claims result in a full refund of excess charges plus interest. Based on FCA estimates, successful claims could be worth thousands.
For example, if you paid £10,000 in interest and commissions made up 40%, you could reclaim £4,000. The exact amount depends on your contract and how much the dealer inflated the interest rate.
What If Your PCP Claim Is Rejected?
If the lender refuses your claim, you can escalate the complaint. The Financial Ombudsman Service (FOS) can review your case and decide independently. Many rejected claims get overturned at this stage.
You have six years from the date of the agreement or three years from when you discovered the issue to claim. Acting fast ensures you don’t miss out on potential compensation.
Will PCP Claims Affect the Car Finance Industry?
The FCA is tightening regulations on car finance agreements. Some lenders may have to set aside billions for redress, similar to the PPI scandal. As more claims emerge, industry-wide changes could protect consumers from unfair practices.
Final Words
PCP finance has helped millions buy cars, but many agreements were unfair. If you suspect hidden commissions inflated your costs, you may have a strong case for compensation. Reviewing your contract and acting quickly can help reclaim what you’re owed.