Car dealerships played a key role in the mis-selling of Personal Contract Purchase (PCP) car finance deals. Customers were often given misleading information about commission structures, interest rates, and long-term financial commitments. This led to thousands of UK car buyers facing unexpected financial losses and unmanageable debt.
How PCP Deals Work
PCP allows buyers to pay lower monthly payments by deferring a large portion of the car’s value to a final balloon payment. Customers can return the car, make the final payment, or trade it for a new deal. Many were not told about hidden costs, excessive interest rates, or commission-driven sales tactics.
The Role of Car Dealerships in Mis-Selling
Car dealerships acted as middlemen between lenders and consumers, often prioritising commissions over customer interests. Sales staff were incentivised to push PCP deals with higher interest rates to increase their earnings. Customers were frequently misled into believing these were the most affordable or only available options, contributing to what has now become a widespread car finance scandal.
Commission Structures and Hidden Costs
Many dealerships earned commission based on the interest rate charged to the customer. Higher interest rates meant bigger commissions, leading to inflated costs that customers were unaware of. The Financial Conduct Authority (FCA) found widespread evidence of dealers manipulating rates for personal gain.
Lack of Proper Disclosure
Consumers were often not informed about the way dealers profited from their finance agreements. Important details about commission payments, interest rates, and balloon payments were buried in lengthy contracts. Many only realised they had been misled when they struggled with unaffordable payments.
FCA’s Crackdown on PCP Mis-Selling
The FCA banned discretionary commission models in 2021 to stop dealerships from setting inflated interest rates. This intervention aimed to prevent dealers from manipulating deals at the customer’s expense. Despite this, many consumers who were mis-sold finance before 2021 remain eligible for compensation, with some pursuing the best PCP claims to recover unfair charges.
How to Claim Compensation for PCP Mis-Selling
If you took out a PCP finance deal before 2021, you may be entitled to a refund. Start by checking your contract and any communication that shows interest rates were manipulated. You can raise a complaint with the finance provider and escalate it to the Financial Ombudsman Service if necessary.
Real-Life Impact of PCP Mis-Selling
Many drivers were left in negative equity, where their cars were worth less than the outstanding finance. Customers who thought they were getting fair deals ended up paying thousands in unnecessary interest. Some even faced repossession due to unaffordable balloon payments at the end of their contracts.
Final Thoughts
Car dealerships prioritised profits over transparency, leaving thousands of UK consumers trapped in expensive finance agreements. The FCA’s intervention has helped curb unfair practices, but many victims of past mis-selling still need justice. If you suspect you were mis-sold a PCP deal, take action to reclaim what you are owed today.
