If you took out a Personal Contract Purchase (PCP) car finance agreement in the UK, you may be entitled to compensation. Many PCP agreements arranged through dealerships included hidden commissions or inflated interest rates, which could mean you were mis-sold your finance.
This guide explains:
- What PCP car finance is and how it works
- How PCP agreements may have been mis-sold
- How to identify if you are eligible for a claim
- How much compensation you could receive
- Step-by-step instructions to make a PCP claim
- Common FAQs about PCP claims
What is PCP Car Finance?
Personal Contract Purchase (PCP) is a popular way to finance a new or used car in the UK. Unlike Hire Purchase (HP), PCP allows you to:
- Pay a deposit upfront
- Make monthly payments for an agreed period
- Pay a final “balloon” payment to own the car
- Return the car at the end of the agreement if you don’t want to buy it
The flexibility of PCP makes it attractive, but many customers have discovered that the agreements were mis-sold due to undisclosed dealer commission or inflated interest rates.
How PCP Finance Could Be Mis-Sold
Mis-selling in PCP agreements typically involves:
- Hidden dealer commissions that increase your interest rate
- Lenders failing to explain the true cost of the finance
- Pressure to sign the agreement quickly
- Misleading information about early termination, balloon payments, or monthly repayments
- Offering only one finance option rather than comparing deals
Discretionary commission arrangements were common in PCP deals. This meant dealers could increase the interest rate to earn a larger commission, without explaining this to the customer. This practice was investigated and banned by the Financial Conduct Authority (FCA) in 2021.
Signs Your PCP Agreement May Have Been Mis-Sold
You may have a claim if any of the following apply:
- You were not told the dealer received commission
- Interest rates were higher than expected or above the market rate
- The agreement terms were unclear or confusing
- You were only offered one finance deal without alternatives
- You were pressured to complete the finance agreement quickly
- Hidden fees or costs were added without explanation
Even if you have already completed the PCP agreement, returned the car, or sold the vehicle, you may still be able to claim compensation.
Who Can Make a PCP Claim?
Eligibility generally requires:
- PCP agreement taken out in the UK before 2021
- The agreement was arranged through a dealer
- Dealer commission or inflated interest was not disclosed
- You were charged more than necessary for the finance
Common lenders where PCP mis-selling claims may apply include:
- Black Horse Finance
- Santander Consumer Finance
- Close Brothers Motor Finance
- MotoNovo Finance
- Barclays Partner Finance
Other UK lenders may also be involved. Each case depends on the specific finance agreement and how it was arranged.
How Much Compensation Can You Claim?
The amount of compensation depends on several factors, including:
- The total amount borrowed
- The interest rate applied
- The dealer commission that was charged
- The length of the PCP agreement
Compensation may include:
- Refund of excess interest paid
- Refund of undisclosed commission
- Additional interest payments on the refund
Some claims could result in hundreds or even thousands of pounds, depending on the size of the finance agreement and the amount of commission added.
Step-by-Step Guide to Making a PCP Claim
1. Review Your Finance Agreement
Start by gathering your PCP documents. Look for:
- Interest rates
- Dealer commission details
- Lender name and contact details
- Agreement start and end dates
If you cannot locate the paperwork, lenders typically keep records of all agreements.
2. Contact the Lender
Submit a complaint directly to your lender. Include:
- Details of the PCP agreement
- Why you believe the finance was mis-sold
- Supporting documents or statements
Lenders are legally required to investigate complaints and respond within a set period, usually 8 weeks.
3. Escalate to the Financial Ombudsman
If the lender rejects your complaint or fails to respond, you can escalate the matter to the Financial Ombudsman Service (FOS). The FOS is independent and can award compensation if they agree your PCP was mis-sold.
4. Consider a Claims Specialist
Many people choose to use a claims management company or solicitor, who can manage the process on your behalf. Typically, these companies charge a percentage of the compensation if the claim is successful.
Common PCP Claim Scenarios
PCP Agreement Already Paid Off
Even if your PCP agreement has finished, you may still claim if it was mis-sold. Lenders retain historical records for investigation purposes.
Car Already Sold
Selling the vehicle does not normally prevent a claim. Compensation is calculated based on the finance terms and interest charged.
Early Termination of PCP
If you ended the PCP agreement early, you may still claim, particularly if you were charged additional interest or fees that were not disclosed.
Multiple PCP Agreements
Customers with more than one PCP agreement may be able to claim on each agreement that was mis-sold.
How Long Does a PCP Claim Take?
The claim process can vary, but usually involves:
- Submitting a complaint to the lender
- Lender investigation
- Decision or settlement offer
- Possible escalation to the Financial Ombudsman Service
The process may take several months, depending on the lender’s response and complexity of the case.
Frequently Asked Questions About PCP Claims
Can I claim if the dealer pressured me to take finance?
Yes. Pressure tactics are considered a form of mis-selling if you were not given clear information or alternatives.
Do I need a solicitor to make a claim?
No. You can submit a claim directly to the lender or Financial Ombudsman Service. However, some people use solicitors or claims specialists to manage the process.
Is there a time limit for making a claim?
While most PCP claims are eligible, regulators may introduce deadlines following investigations. Starting early is recommended to avoid missing potential compensation.
Can I claim if my PCP was arranged through a broker?
Yes. If the broker prioritised commission over your best interests or failed to explain the finance properly, you may have a claim.
Final Thoughts
PCP mis-selling claims could represent a significant compensation opportunity for UK drivers. If your PCP agreement included hidden commissions, inflated interest, or unclear terms, you may be eligible for compensation.
Start by reviewing your finance agreement and checking for undisclosed charges. Acting early increases your chance of a successful claim and ensures you don’t miss any potential compensation.
Next, consider contacting your lender, escalating to the Financial Ombudsman if necessary, or using a claims specialist to manage the process for you.
Even if your PCP has ended, the car has been sold, or you’ve already finished payments, you could still claim. Understanding your agreement and eligibility is the first step to recovering money you may be owed.