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Around 90% of all new car deals are made using a PCP – a personal contract purchase. In theory, it’s a convenient way to buy a vehicle, as you don’t have to pay a large amount of money upfront. It’s also a relatively simple process. You agree to pay a monthly sum for a specified number of years, then a balloon payment at the end, if you wish to own the vehicle. You also have the option to exchange it for another new car, as part of a fresh PCP deal.
However, these PCP plans aren’t always as good as they seem on paper. In fact, they’re fast becoming the UK’s next major mis-selling scandal.
This infographic explains just how problematic PCPs are proving to be.
PCPs – the facts about mis-selling
- The Financial Conduct Authority have estimated that mis-sold PCP deals are costing consumers approximately £300 million a year in interest charges. These over-payments are benefitting the car dealerships, not the customer.
- The FCA released a report in 2019, focusing on car finance. It revealed that more than 560,000 consumers were being charged 50% over what they should be paying for their finance deal.
- Alarmingly, the average amount that a customer is overpaying in interest charges (based on an average £10,000 mis-sold PCP plan, over a four-year period) is £1,100. When you take into account the sheer number of consumers that are over-paying, this equates to a significant amount of money.
- One of the most common reasons for seeking compensation for a mis-sold PCP is lack of information provided. Many car dealerships fail to inform customers about the key details. In fact, only 28% of dealers explained to their customers what would happen if they missed a payment (or withdrew from the deal entirely), or how much they would owe at the end of the contract.
- Only 31% of brokers informed their customers that they wouldn’t automatically own the car when the term was up. Also, some consumers don’t realise that they still owe money at the end of the contract, including the balloon payment (which is usually a sizeable sum of cash).
- Most car-sellers are incentivised through commission. Each dealership typically has different commission models, with some offering a larger bonus payment than others. Naturally, brokers push consumers into deals that earn them the highest sum of cash. The difference between an average commission and the largest commission a car-seller could earn is £2,000, which is why so many brokers charge higher interest rates.
Have you been mis-sold PCP?
If the PCP terms weren’t explained adequately to you, or you weren’t offered a full range of payment options, then you may have been a victim of mis-selling. It’s a fast-growing problem in the UK, and if you suspect you’ve experienced this issue, you may be able to seek compensation.
The Financial Ombudsman Service recommends speaking to the car dealership first or alternatively Goodwin Barrett’s team are here to help. We are experts in claiming compensation for victims of mis-selling and have helped thousands of people to claim their money back.