Car Finance Claims

Car Finance is a way of borrowing money to purchase a vehicle. You will usually own the vehicle if you make all the repayments. But we’ve seen shocking examples of lenders failing to carry out detailed background checks to ensure the finance was sustainably affordable for the customer. When finance is proven to be unaffordable from the outset, you should get your interest and charges refunded.

What are the different types of Car Finance?

Hire Purchase agreements are a popular way of financing the purchase of a new or used car (although Hire Purchase agreements are not just for cars). Upon the last payment being made, you own the vehicle.

A Personal Contract Purchase (PCP) is another way of financing a new or used car. You make monthly repayments, although you won’t own the vehicle at the end of the agreement. This is because the repayments are towards the depreciation in value of the vehicle over time, rather than the cost of the vehicle outright. Whilst it might be an attractive option for some customers, the agreement still needs to be affordable.

There are other types Car Finance – such as Conditional Sales and Car Leasing. No matter what the type of Car Finance, the repayments could be hundreds of pounds a month – which some customers struggle to afford.

Winning compensation from a Car Finance affordability claim

Whether you win your claim or not depends on lots of different things; there are no guarantees, but Allegiant will guide you and advise you.

You shouldn’t assume that your lender did their job properly by providing you with the finance. Some lenders do not even check the customer’s regular income and expenditure information. And how can a lender say the finance was affordable if it hasn’t found out the customer’s income and expenditure?

In upholding a complaint about a PCP agreement, an Ombudsman outlined his shock at what the lender thought were good enough affordability checks:

“I express some surprise that BMW does not think it needed an income and expenditure check. I’ve already said it’s up to a business to decide what information it needs – but without even the most basic details of income and expenditure it’s hard to see how any plausible assessment could be made.” https://www.financial-ombudsman.org.uk/decision/DRN2569015.pdf

In another legally-binding decision, the ombudsman made it clear that the lender’s affordability checks were not good enough:

“I think Volkswagen had a responsibility to ask Mrs L for further details about her income and expenditure. Based on all the evidence, I’m not persuaded Volkswagen asked for those details, or for any supporting documents. So, I think there were a number of unanswered questions that Volkswagen needed to address, before it would have been reasonable and proportionate to proceed with Mrs L’s agreement. In these circumstances, as Volkswagen didn’t take additional steps to verify Mrs L’s income and expenditure, I think their checks before providing the hire purchase agreement to Mrs L, weren’t reasonable and proportionate.”  https://www.financial-ombudsman.org.uk/decision/DRN-3861546.pdf

It seems almost unbelievable, but some lenders openly admit the fact that they do not carry out the income and expenditure checks that they should be doing. Audi Finance have said:

“we do not ask for the customer’s income at the point of sale. Instead the retailers ask the customer’s whether based on their income is the agreement affordable – it is then up to the customer’s to check whether they can afford the repayments” https://www.financial-ombudsman.org.uk/decision/DRN5143685.pdf

Similarly, Black Horse have said:

“Ultimately it was for the customer to decide if the repayments were affordable based on her proposed expenditure patterns” https://www.financial-ombudsman.org.uk/decision/DRN5003607.pdf

It is, of course, ridiculous for lenders to try and pass the buck and say it is the customer’s responsibility to check the finance was affordable. In responding to the above comment by Black Horse, the ombudsman made a clear statement that it’s mainly the lender’s responsibility – not the customer’s – to ensure that the finance is affordable:

“I don’t agree nor do I believe this reflects the requirements placed on lenders by the regulator. In fact the decision and burden for that decision is placed mostly on the lender as they have the ability to make the proper and measured assessment of someone’s financial position” https://www.financial-ombudsman.org.uk/decision/DRN5003607.pdf

The lender should be taking into account the customer’s income and regular expenditure – together with the fact that running a car carries its own associated costs. Here is an example from a legally-binding ombudsman’s decision made against FCA Automotive Services UK Ltd (“FCA”):

“That left a monthly disposable income of about £582 from which food, petrol, car tax and maintenance, car insurance (expensive given Mr T’s young age), and the new loan of £255 per month would need to be financed. I think this gave a clear indication that Mr T wasn’t in a position to afford the repayments towards the new agreement without experiencing difficulty or having to borrow further. FCA therefore didn’t make a fair lending decision.”
“As I don’t think FCA ought to have approved the lending, I don’t think it’s fair for it to be able to charge any interest or charges under the agreement. Mr T should therefore only have to pay the original cash price of the car” https://www.financial-ombudsman.org.uk/decision/DRN-3249834.pdf

Apply Now