Car finance

Millions of cars are bought on finance in the UK every year – but car finance can still be pretty confusing! At Resolver, we’re used to tackling questions about everything from hire purchase deals and car finance loans to GAP insurance. Whether your car on finance has been written off or you can’t afford to repay the instalments on your car, we’ve put together this useful FAQ to help you out.

Who can I complain to?

The Financial Ombudsman

We’ll talk about the Financial Ombudsman a lot. The Financial Ombudsman (sometimes referred to as FOS) is the UK’s official expert for sorting out problems with all sorts of money and financial complaints.

It’s worth knowing that the Financial Ombudsman will consider the majority of problems relating to car finance deals, leases or loans. If you’ve tried to resolve the matter with the dealership or car finance company responsible for your finance agreement but haven’t gotten anywhere, you can take the matter to the Financial Ombudsman.

Who’s responsible for my finance agreement? 

If you’re having problems with car finance, it’s important to remember that the dealership who supplied the car and the finance provider responsible for the financial agreement may be different organisations. In many cases, the dealer may act as a credit broker, arranging finance through another business. Always be aware of the terms and conditions of your finance policy! If there’s any confusion as to who’s responsible for your finance agreement, you can consider checking with the Financial Ombudsman.

Vehicle purchases made on finance are covered by the Consumer Rights Act 2015. This means the car itself is covered by all the normal consumer protections, including the requirement for it to be “as described” and of a “reasonable quality”.

I think I was mis-sold a car finance agreement that I could never afford!

Lenders should always check your credit record, income and expenses to make sure you can afford a finance plan.

The FCA has said that not all lenders check properly to make sure a finance plan is affordable or suitable.

Can I make an affordability complaint?

If it was clear that you wouldn’t have been able to afford the car finance at the time of sale, you may be able to make an affordability complaint.

If you could afford the finance at the time but your circumstances have since changed, making the finance unaffordable, you probably won’t be able to make a complaint. It isn’t the lender’s fault that your circumstances have changed.

Be aware

Affordability complaints can take several months to resolve. You’ll need to keep up your loan repayments or your car may be repossessed.

If you don’t want to make an affordability complaint, there are alternatives.

Voluntary Termination (VT)

You can consider ‘Voluntarily termination’ (VT).  This lets you cancel your contract and hand back the car.

Hire Purchase (HP) and Personal Contract Purchase (PCP) finance contracts give you the right to terminate them and hand back your car. You won’t owe any more money if you’ve paid over half the total contract value.

You can’t VT your contract if you’re leasing.

Terminating your contract by VT might be a quicker way and more certain way to save money than making an affordability complaint.

Debt advice

If you're struggling to pay off your finance, you may wish to consider seeking independent advice. The organisations on this page can help you get back on track.

I think I was mis-sold insurance on my Personal Contract Purchase (PCP) car deal!

Car dealers will often sell their own insurance policies alongside PCP deals on new cars.

You should always be fully informed about any costs involved and should never be given misleading information. If you think that you weren’t properly advised or were deliberately misled, you can consider escalating your case to the Financial Ombudsman.

Occasionally, some unscrupulous car dealers may not undertake the necessary background checks before selling insurance policies. If you feel that you have been sold an insurance policy that was beyond your means at the time you took it out, you should use Resolver to contact your insurer. If your insurer cannot resolve the matter, you can contact the Financial Ombudsman. They’ll take a look at your case to see whether you were treated fairly or not. 

GAP insurance

Guaranteed Asset Protection (GAP) insurance serves to cover any difference between the market value of your car due to depreciation and the cost of a new car. Sometimes, however, GAP may have been mis-sold – primarily in situations where a customer has paid a large deposit and only taken out a small amount of finance on a car. If you feel you were incorrectly advised regarding GAP insurance, Resolver can help you make a claim. 

If you discover that your GAP insurer has paid out less than previously expected, you should use Resolver to make a complaint. It may be the case that something went wrong when the policy was sold – the Financial Ombudsman may be able to help you with this. 

I can’t afford my repayments

If your circumstances change and you find that you can’t afford your monthly repayments, you should contact the company responsible for organising your finance as soon as possible. They may be able to reach an agreement with you that will allow you to change the terms of your repayment.

If you don’t get in contact with your car finance company, they are likely to attempt to repossess the vehicle.

Generally speaking, you should be fully informed about your finance agreement when it’s sold to you. If the cost of repayments doesn’t match up with what you were sold, the dealership or the finance provider may be responsible. This can often be the case if your interest rate or monthly payments have charged unexpectedly.

If you are unable to resolve the matter with the dealership or the finance provider, you can consider escalating your case to the Financial Ombudsman. They’ll take a look and judge whether you’ve been treated fairly. 

I didn’t know I would be charged for driving over a certain amount of miles a year! 

If a car dealership or finance organisation puts a limit on excess mileage, your rights under the Consumer Rights Act 2015 say that they should make it clear to you at the point of purchase that you’ll only be allowed to drive a certain number of miles a year.

If the limit and any charges involved were not clearly explained and documented, you may be able to make a complaint. You should use Resolver to contact either your dealership or finance provider (if the dealership is not responsible for arranging your finance). 

If you are unable to resolve the matter with the finance provider, you can escalate your case to the Financial Ombudsman.

Dealership is claiming that I have damaged my car 

Your rights under the Consumer Rights Act 2015 say that any car sold to you should be supplied as described and fit for purpose. If the car supplied to you was faulty when you received it and the dealer claims that any faults have come from wear and tear, you should contact them via Resolver, presenting all documentation and evidence you have about the state of the vehicle. You should always present any information that was given to you about the condition of the car, including adverts or brochures. 

We advise you to take photos documenting the vehicle’s condition when you bought it. If necessary, you should get a mechanic to assess the vehicle’s mechanical condition.

If you are unhappy with the way the dealership has responded to your complaint, you should use Resolver to escalate your case to the Financial Ombudsman. 

My car has broken down

If your car has broken down or you have problems with your car, your dealership or finance provider have a responsibility to help if something goes wrong. You should use Resolver to contact them, explaining the situation.

Things can get confusing if your dealership or finance provider deny responsibility.

What if the finance provider says you have to take things up with the garage?

It’s important to remember that finance providers have some responsibilities under the law if things go wrong.

Hire purchase agreements are covered by the Consumer Rights Act, so you’ve got all your normal protections here. 

In addition, if you’ve paid any amount towards your car using a credit card or loan (and the total value of your car is between £100 and £30,000), Section 75 applies and your credit provider is equally responsible if something goes wrong with your car. You should use Resolver to inform them that you wish to make a Section 75 claim.

Section 75 is relevant even if you’ve only paid a deposit. You may have slightly less protection if you’ve gone for car finance with no deposit required. You may not have the same protection for car finance without deposit until you’ve started paying instalments.

What happens if the car I bought on finance is written off? 

If your car is written off, your insurance provider should get back to you with a settlement figure. In some cases, this figure might be less than the amount you’ve got left to pay off on your finance agreement. 

If you’re left with a shortfall after a write-off, you should first try and challenge the agreement with your insurance provider. Settlements are normally based on the value of a car if sold in your area. See if you can find evidence of a similar car being sold for a higher price!

If your insurer won’t budge or the price they’ve offered you is correct, you should take the matter to your car finance company. They may be able to work out an arrangement with you. You could also consider asking to use the settlement to pay part of the repair costs, covering the remainder yourself. This will allow you to continue to pay off your finance instalments.

Cancel loan agreement due to faults 

If you find that there are huge problems with a car you’ve bought through a hire purchase scheme, you should expect to either have the dealer fix the problems or to have the agreement cancelled.

If you have a problem with your car, your hire purchase agreement normally means that the hire purchase business is the provider of the vehicle (rather than the dealer) and is therefore responsible for the quality of the car. You should get in touch with the dealer to get the problems sorted. If they are unable to help, you can escalate your case to the Financial Ombudsman. You may be due some money back!