PCP Mis-Selling...

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Tue 19 Jul 2016 09:55
PCP Mis-Selling... - TheBroker
So, now the PPI claims are drying up for claims lawyers, their sights are now aimed at PCP.

If this looks to be fruitful for them I predict a swathe of both genuine and spurious claims on this from the public. Many hoping to make a quick buck.

Undoubtedly some PCP will have been mis-sold, like just about everything at some point but the risk to the industry and economy is noteable as the cost of claims will be passed on to future customers so finance rates across all products will rise.

Having said that if anyone has any questions I'll try to help, with clear impartial advice, as always.
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Tue 19 Jul 2016 11:33
PCP Mis-Selling... - RT

The big scandal on PPI wasn't the original mis-selling, it was the following claim sharks taking an unneccessary share of the compensation along with taking up billions of hours on phone calls to people that never had PPI at all! With hindsight, it would have been cheaper if the banks had been simply forced to refund all PPI charges for the specified period, regardless of whether mis-sold or not.

Liability for mis-selling could occur anywhere - many car salesmen are still talking customers into buying diesels when their usage pattern makes petrol the much better choice

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Tue 19 Jul 2016 11:49
PCP Mis-Selling... - TheBroker
Shhh don't say that too loud just in case a claims chaser reads this, otherwise that could be on the 'have you been mis-sold....' automated phone script too.
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Wed 20 Jul 2016 17:50
PCP Mis-Selling... - csgmart

Interesting.

What exactly could be mis-sold on a PCP? Would (for example) a verbal commitment from the dealer that "your car will definately have some equity in it when you come to replace it at the end of the term" be the basis for a claim should the said car not have any equity in it when the agreement comes to it's natural end?

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Sun 24 Jul 2016 14:01
PCP Mis-Selling... - slkfanboy
The idea centres around the future value of the car and the assumption that your will get worth the stated amount when you purchased the car.

This issue that so many ppl have purchased car on PCP that the 2nd values have dropped and many will have a shock.

This would totally depend on what the sale person said at the time of selling and the punters expectations.

Therefore you get 5-10% less for your car and so maybe 700-1,500 bill and further you don't get the option to use your car as a deposit for the next one.


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Mon 25 Jul 2016 10:17
PCP Mis-Selling... - csgmart
Therefore you get 5-10% less for your car and so maybe 700-1,500 bill and further you don't get the option to use your car as a deposit for the next one.

I've had several cars on PCP so reasonably familiar with the way these work. I don't think you would ever get a bill at the end of the deal, even if 2nd hand car values dropped. That is the one benefit of PCP schemes - you can simply walk away at the end of the term with nothing to pay (the manufacturer effectively takes the hit). However most PCP schemes are weighed in favour of the manufacturer and they can accurately estimate the value of the car in 3 or 4 years time.

My question was more around the fact that I have been told on each occassion that I can expect some equity to put into the next car. On the last PCP deal I had no equity at all as the car was worth less than the balloon amount. In this case I was simply able to hand the car back and walk away with nothing more to pay. I was rather miffed that the car had no equity in it - especially as I was told it would have, but then I am not stupid enough to believe a salesman.

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Mon 25 Jul 2016 10:26
PCP Mis-Selling... - gordonbennet
Never had one of these deals and most likely never will.

I would have assumed the handing back value of the car would have been agreed before delivery, with allowances for higher mileage damage and missed servicing obviously chargeable.

Would never have occured to me to take on such a contract with verbal assurances from a shark only to go on.
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Wed 27 Jul 2016 13:28
PCP Mis-Selling... - TheBroker
The construct of a PCP is as follows.

You pay a deposit, you pay a number of set monthly payments and then you can pay the 'balloon' payment, which based on certain assertions made by the customer (annual mileage and commitment to keep vehicle in good condition and in good order and serviced etc), and assumptions made by the dealer based on market data and the customers assertions to calculate the value of the balloon payment (do not confuse the balloon with a Guaranteed Future Value or GFV on some arrangements).

At the end of the contact, the customer can either hand the vehicle back (and be subject to any contractual penalties for not keeping the vehicle in good order or condition), keep the vehicle and pay the balloon or sell the vehicle and pay off the balloon.

If the vehicle is as predicted by the assertions and reasonable assumptions made by the customer and dealer, then the vehicles retail value should be roughly equivalent to the balloon payment. Any surplus, which should never be relied upon or guaranteed is available for the customer to dispose of however they choose.

The key word above is retail value. We all know that a dealer will not p/x a car at retail, they will buy it at trade value based on CAP and Glass's guide (roughly what WeBuyAnyCar would pay), so trying to p/x against a new car could see the customer with negative equity because to the trade it is worth possibly less than the balloon. This is not unreasonable as a trader will need to put a warranty on the vehicle, do any remedial works, advertise it, and cover overheads, oh and make some profit.

An issue with PCP mis-selling may come around for the following reasons:
1) The dealer promised the car would be worth more than the balloon when, (based on the assertions and assumptions) clearly it would not be.
2) The dealer did not explain the nature of PCP, the pit-falls, the possibility it may result in negative equity, the circumstances under which any penalites may be incurred, the rate of interest, total amount payable and the fact there are other more possibly more cost effective ways of funding a vehicle such as a personal loan or other financial product.
3) The dealer did not confirm the customer was in fact financially able to pay for the finance they were taking out (affordability)
4) The dealer artifically inflated the balloon for the vehicle in order to reduce monthly cost knowing full well that the future value would not co-incide with the balloon and this artificial inflation was not at the customers request. (e.g. working out figures based on a low annual mileage knowing full well the customer would be doing considerably more)
5) Perhaps the dealer supplied a vehicle clearly unsuitable for the customers requirements and knew this (e.g. customer asking for a family car and sells them a Citroen C1 saying it will be fine and meet all their needs over time)

Other reasons can come around from fraud, mis-representation and other such chicanery.

In theory this should not happen as a finance broker/dealer should go through everything in detail with the customer to ensure they are being provided with the correct financial product and correct vehicle to meet their current and future needs based on speaking to the customer properly.

I predict the biggest possibility for PCP mis-selling (and easiest target) will come from franchised dealers pushing dealer finance as they will be targeted to sell the finance and will not necessarily be incentivised to go through the above properly or suggest the customer consider alternative finance options (some dealers cannot do Contract Hire to private individuals but Contract Hire may have been a cheaper option but the salesman will not want to point this out and lose a deal). (another reason to use an independent broker).
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Mon 8 Aug 2016 18:05
PCP Mis-Selling... - concrete

A question for the Broker.

If I entered into a PCP with the lowest possible monthly payments, then 9 months later had the money to purchase outright, can this be done?

Cheers Concrete

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Mon 8 Aug 2016 19:38
PCP Mis-Selling... - leaseman

Concrete: Read the Agreement! That will tell you better than The Broker or anyone else on this Forum.

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Tue 9 Aug 2016 18:19
PCP Mis-Selling... - concrete

Concrete: Read the Agreement! That will tell you better than The Broker or anyone else on this Forum.

Thanks leaseman, I would naturally read carefully any agreement before entering into it. I just wanted a few pointers for ammunition in case I get spun a line. Never had a PCP but want to buy a new vehicle for towing. Don't have the money until next June so thought a PCP and then a settlement might do the trick.Not desperate to buy just yet but flying a few flags.

Cheers Concrete

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Tue 9 Aug 2016 19:27
PCP Mis-Selling... - leaseman

Hi Concrete.

The term "Personal Contract Purchase" is not defined in British Law. However, PCP agreements are almost invariably based on a Hire Purchase Agreement where the regular, so called, rentals are followed by an enhanced (or Balloon) rental. The rentals effectively repay the full cost of the goods, plus interest, over the hire period and the hirer is granted an option to puchase the goods under the specified terms by payment of the Balloon and an "Option to Purchase" fee.

Any such agreement between a Finance House and an individual (except in the case of very expensive goods) is covered by the Consumer Credit Act, and the individual has a right to early terminate the contract and hence take good title to the goods by paying off the remaining rentals (including the Balloon and Option to Purchase fee) less a rebate of interest as specified by the Act.

I welcome your diligence in reading the agreement prior to signing it- unfortunately you are in a tiny minority, as evidenced by the number of sob stories we see on this Forum!

There continues to be confusion as the term "rental" within a Hire Purchase Agreement is really an "Instalment" - being a part of the purchase price payable towards the discharge of the debt. It should not be confused with a rental in it's true meaning under a Lease, or Contract Hire agreement where title to the goods can never pass to the Lessee.

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Wed 10 Aug 2016 17:45
PCP Mis-Selling... - concrete

Thanks leaseman, very lucid explanation. Some of the deals my friends have with PCP seem very good. Often a new vehicle can be supplied at a cheaper price than buying a used one outright. I guess it's called' 'moving metal'. I shall get some ball park figures soon and do some thinking.

Cheers Concrete

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Thu 15 Sep 2016 14:04
PCP Mis-Selling... - TheBroker

Thanks leaseman, very lucid explanation. Some of the deals my friends have with PCP seem very good. Often a new vehicle can be supplied at a cheaper price than buying a used one outright. I guess it's called' 'moving metal'. I shall get some ball park figures soon and do some thinking.

Cheers Concrete

Hi Concrete,

Following from my earlier reply...

PCP and PCH deals can be very good. There are a number of reasons behind this which include the discount the funder negotiates with the manufacturer, the finance rate, the residual value of the car over time and the discount the broker agrees with the manufacturer/funder.

This is why we can supply a VW Passat worth £26,000 on contract hire for only £246/month fully maintained on Personal Contract Hire which would cost you nearly twice as much if you bought it on personal loan over the same time then sold it to recoup as much as you could.

On residual values you will find big engined uneconomical cars and cheapy cheap cars have very poor residuals so cost more to lease than a better brand or smaller engined cars.

Edited by TheBroker on 15/09/2016 at 14:05

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Mon 8 Aug 2016 22:40
PCP Mis-Selling... - RT

A question for the Broker.

If I entered into a PCP with the lowest possible monthly payments, then 9 months later had the money to purchase outright, can this be done?

Cheers Concrete

Generally, yes you can - but whether that's a statutory right I don't know.

I recently bought a new VW Touareg - at the time VW were offering an additional £5,000 discount if you took out their PCP - I took out the PCP, got the discount, got a settlement figure after 14 days and then paid it off in full - interest was calculated on the length of time so just a few £100 giving a net discount of about £4,600.

I don't know if they have the right to refuse the termination.

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Thu 15 Sep 2016 13:58
PCP Mis-Selling... - TheBroker

A question for the Broker.

If I entered into a PCP with the lowest possible monthly payments, then 9 months later had the money to purchase outright, can this be done?

Cheers Concrete

Hi Apologies for my conspicuous absense and not replying sooner.

As with ANY contract, there is always a way out. It is just a matter of whether it is financially viable to exit it.

The short answer is yes it can be done. Best thing to do is call the funder and ask for an early settlement figure. Then you can decide if you want to do it.

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