66 Saturday December 4 2021 | the times
Money
to pay a balloon payment at the end of
the contract if you want to own the car.
If you don’t come up with the extra
cash, you can hand back the keys and
walk away.0 What do people complain about?
Large numbers of complaints are about
the state of the financed cars them-
selves — drivers usually complain to
their dealership first, then the car
finance company if their grievance is
not dealt with.
Dealers will often get commission for
introducing customers to a loans com-
pany, and to do this they need a credit
broking licence from the FinancialConduct Authority (FCA), the City reg-
ulator. This licence gives consumers
important protection, because under a
lesser-known part of the 1974 Consum-
er Credit Act (Section 56), whoever is
selling you the car on finance is acting
as an agent on behalf of the lender, es-
sentially making the lender liable for
any misrepresentation.
One car buyer was handed thou-
sands of pounds in refunded payments
and £200 compensation in July after a
new £65,000 BMW he had bought
from a dealer on finance in May 2018
was not as described. The buyer had
asked for new black alloy wheels and aThe temptation is for
dealers to upsell. It
needs more scrutiny
D
aniel Frith bought a two-
year old BMW 7 series in
November 2017 under a
three-year personal con-
tract purchase (PCP) plan
from BMW Financial Services.
He took a six-month repayment holi-
day because of Covid-19 and the PCP
plan was due to finish earlier this year,
when he had the choice of handing the
car back or signing a new three-year
PCP. He chose the latter option and
signed a deal with BMW in March.
Then, in September, BMW’s collec-
tions team got in contact. They told himDodgy motors and hidden fees:
With most buyers
using some kind of
credit, vehicle finance
is big business. So how
do you make sure you
are getting a good deal,
asks George Nixon
that no new agreement had been
started and that he had failed to pay an
end-of-agreement “balloon” payment,
which you usually pay if you are buying
a car outright. This meant that he had
defaulted on his loan agreement, and
that had ruined his credit score and led
his banks to cut the limit on some of his
credit cards.
Frith, 50, a self-employed property
consultant, complained to BMW
because as far as he was concerned he
had a new deal. But it was only after he
contacted the chief executive that the
error was resolved, almost threemonths later. BMW apologised, gave
him £250 compensation and a quote for
a new three-year PCP. It also promised
to wipe the missed payments from his
credit file.
Frith said: “BMW is generally quite
competitive with the finance deals it
offers but this situation would certainly
put me off using the firm again. I clearly
should not have had to write to the chief
executive to sort this out.”
BMW Financial Services said: “A
thorough review of Mr Frith’s agree-
ment has taken place and all steps have
been taken to resolve the case.”
PCPs and hire purchase agreements
for vehicles are now some of the most
complained about financial products.
They are the second most popular
type of household borrowing, after
credit cards, and are held by about
6.8 million people.
The Finance & Leasing Association
(FLA) said it represents most car
finance companies, and that 93 per cent
of new cars are bought on finance
provided by its members. Effectively
almost all drivers now use credit to buy
— or hire, really — their cars.
You can get car finance from
divisions of high street banks such as
Lloyds and Santander; specialist
lenders dedicated solely to car finance;
or in-house finance provided by manu-
facturers such as BMW, Ford, Mer-
cedes and Volkswagen.
Since April 2020 the Financial
Ombudsman Service (FOS) has count-
ed disputes about car finance agree-
ments separately to other types of hire
purchase loans, and has registered
11,101 complaints.
Between July to September this year
it was the sixth most complained about
financial product, with 1,491 com-
plaints. Some 44 per cent of assessed
complaints were upheld, compared
with an average uphold rate of 38 per
cent across all financial products.
Among the rulings were dealers mis-
representing the state and history of
the cars they sold on finance, disputes
over hidden charges and finance
companies that approved big loans for
new cars for borrowers who had low
incomes or were unemployed.
Some finance firms have been the
subject of more complaints than high
street banks. Volkswagen Financial
Services, which provides finance for
Audi, Seat and Porsche, was the most
complained about, being the subject of
1,159 FOS complaints in the first half of
this year, with 54 per cent of those that
were assessed upheld.
Volkswagen Financial Services said:
“Like many businesses we experienced
some delays in resolving customer
complaints over the pandemic, but
normal service levels have since been
restored. As a company that keeps
more than a million motorists on the
road, we take any complaints extremely
seriously and work closely with the
ombudsman to resolve any issues.”0 The types of loans
There are two main kinds of car
finance. With a hire purchase agree-
ment you pay for the car over a set
timescale, usually between two and
five years. The monthly repayments are
set in advance and you are the vehicle’s
registered keeper, responsible for
insurance and maintenance, but you do
not own it until the loan is fully repaid.
PCPs are more popular, but are more
complex because they factor in the
vehicle’s depreciation in value during
the term of the agreement (usually
three to four years). You have to give an
estimated annual mileage that will
affect the expected future value of the
car. Monthly payments are lower than
with an HP agreement because the
depreciation is factored in, but you have£32bn
value of car finance
loans approved
last year