Ready yourself for a new wave of phone calls from claims lawyers telling you that you could be entitled to hundreds of pounds in compensation.
That’s because they’ve started to investigate the mis-selling of PCP car finance deals, according to the National Association of Commercial Finance Brokers.
The NACFB said lawyers have begun to scrutinize dealers and finance firms on whether customers were correctly informed about the higher interest rates for PCPs compared to hire purchases and the issue of holding equity in the car.
With the volume of Payment Protection Insurance cases drying up, claims lawyers have turned their focus to the consumer finance industry, specifically PCP, the NACFB said.
It’s certainly a lucrative proposition for claims firms, with an estimated one million cars sold on PCP deals last year alone.
The potential for mis-selling relates to insufficient, poor or, in some cases, deliberately misleading advice given by car dealers and finance firms when recommending PCPs to car buyers, both new and second-hand.
The NACFB said two criteria are currently being investigated by layers.
Firstly, it believes few car owners taking out a PCP, whether for private or business reasons, were warned that, over the term of the loan, they would be paying considerably more in interest than they would if they purchased their vehicle under a hire purchase (HP) agreement.
And it also understands that car salesmen have told prospective buyers considering PCP that they will be in equity at the end of the contract, as the car is likely to be worth more than the final optional ‘balloon payment’ figure.
Lawyers are said to be looking into whether they inform the prospective buyer that this ‘profit’ will then help towards the down payment on the next car.
Graham Hill, board member and car finance expert, NACFB, said: ‘If the PPI claims lawyers conclude there is enough basis to put forward a mis-selling case on PCPs then, given the huge volumes in which these products have been sold to both private individuals and businesses, the car finance industry could be shaken to its roots.
‘While the PCP in itself can be an appropriate solution for many car owners, as it reduces the monthly payments quite significantly, the issue lies with the way these products have been sold.
‘Were people made aware of the increased interest rate charges on PCPs relative to hire purchase agreements, and were they misled about the prospect of equity, either deliberately or out of dealer naivety?
‘In the majority of cases, I suspect ignorance and confusion among dealers is to blame.
‘But this will not help them and the finance providers behind them if, in the months ahead, PCPs are judged to have been mis-sold.
‘In the event that this happens, a significant number of consumers and business owners could be in for a sizeable cash windfall from the cars, motorcycles and vans they have purchased.’