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Have you bought a new car on a Personal Contract Plan (PCP) from a dealership? If so, you could have been mis-sold your car loan.
Car owners who purchased their car using this type of finance deal from a dealership are being warned they might have fallen victim to a new type of mis-selling scandal. This relates to car finance known as Personal Contract Plans (PCP) and thousands of people could be affected by this as it is one of the most popular ways to finance a new car.
The National Association of Commercial Finance Brokers (NACFB) says that the complex nature of PCPs is being exploited by dealers to convince drivers they are getting a better deal, or that the PCP deal on offer is a more economical alternative to traditional hire-purchase (HP) arrangements. A PCP is a bit like a personal loan that typically runs for between two and four years. But the size of the loan is equal to the expected amount of depreciation in the car over the length of the deal.
Car owners who purchased their car using this type of finance deal from a dealership are being warned they might have fallen victim to a new type of mis-selling scandal. This relates to car finance known as Personal Contract Plans (PCP) and thousands of people could be affected by this as it is one of the most popular ways to finance a new car.
The National Association of Commercial Finance Brokers (NACFB) says that the complex nature of PCPs is being exploited by dealers to convince drivers they are getting a better deal, or that the PCP deal on offer is a more economical alternative to traditional hire-purchase (HP) arrangements. A PCP is a bit like a personal loan that typically runs for between two and four years. But the size of the loan is equal to the expected amount of depreciation in the car over the length of the deal.
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PCP's have become popular as they seem to offer the car buyer with a cheaper way to buy a car, but is this actually true? The NACFB say buyers can end up paying much more interest than on hire-purchase deals – even if the APR (annual percentage rate) appears to be the same.
This is due to the fact that part of the PCP deal relates to the balloon payment and is effectively an interest-only loan, which is not paid down during the term of the deal. As a result, interest charges mount up more quickly, and anyone who uses PCP and then decides to buy the car outright will face a much higher interest bill than if they had gone down the hire-purchase route. The NACFB believes that some dealerships do not always make this clear when promoting PCP's over traditional hire purchase agreements, and this could potentially provide a basis for mis-selling claims.
If you think you may have been mis-sold a car loan then please register your details for a free audit of your car finance. We will be back in touch with the information we require.
This is due to the fact that part of the PCP deal relates to the balloon payment and is effectively an interest-only loan, which is not paid down during the term of the deal. As a result, interest charges mount up more quickly, and anyone who uses PCP and then decides to buy the car outright will face a much higher interest bill than if they had gone down the hire-purchase route. The NACFB believes that some dealerships do not always make this clear when promoting PCP's over traditional hire purchase agreements, and this could potentially provide a basis for mis-selling claims.
If you think you may have been mis-sold a car loan then please register your details for a free audit of your car finance. We will be back in touch with the information we require.
