Financial Recovery: The Benefits of Challenging Mis-Sold Car Finance

In recent years, the topic of mis-sold car finance has gained considerable attention, especially in the UK, where personal contract purchase (PCP) finance is one of the most common methods of purchasing cars. 

Many consumers have raised concerns about being misled during the finance process, particularly around how interest rates and commissions were presented to them. 

However, a key question for many is whether it’s worth going through the lengthy process of claiming compensation for mis-sold car finance, especially when the amount they might recover could be as little as £300 or £500.

PCP finance is hugely popular in the UK, with around 80% of new car purchases being made using this type of finance deal. PCP agreements allow drivers to pay a lower monthly amount compared to traditional loans, with the option to buy the car at the end of the contract or hand it back. 

However, the transparency of these deals has been called into question. One of the main issues has been the lack of clarity regarding the commission paid to dealers by lenders. In some cases, car dealers were incentivised to secure higher interest rates, increasing the cost to the consumer without properly disclosing this information.

For consumers who believe they were mis-sold a PCP deal, reclaiming compensation is possible, but the process can be long and frustrating. In many cases, it involves gathering documentation, filing a complaint, and waiting months for an outcome. So, is it worth it? The answer depends on a few factors, such as the amount of money involved, the consumer’s personal financial situation, and their willingness to engage in a potentially drawn-out process.

If the amount of compensation being claimed is relatively small, say £300 or £500, some might question whether it’s worth the effort. 

Filing a claim can involve gathering all the necessary paperwork, including finance agreements, statements, and any correspondence with the dealer. This can be time-consuming and requires attention to detail. On top of that, once the claim is submitted, it may take months—sometimes even longer—before a resolution is reached. During this time, the consumer must remain patient, with no guarantee of a successful outcome.

While £300 or £500 might not seem like a large amount, it’s important to remember that this money was wrongfully taken in the first place, due to the mis-selling practices, explains Claim Smart. 

For some people, getting this amount back could make a real difference, especially if they are already dealing with tight budgets or financial stress. Moreover, if successful, reclaiming this money is not just about the amount; it’s also about holding the industry accountable for its actions and ensuring that these kinds of mis-sold finance deals don’t continue in the future.

On the other hand, for consumers who can afford to absorb the extra costs and who do not want to deal with the hassle of lengthy paperwork and months of waiting, the potential reward may not seem worth it. In some cases, consumers have reported that the compensation they received was less than expected, which can add to the frustration.

There are services available, including claims management companies, that can assist in filing a claim, though they often charge a fee or take a percentage of any compensation won. These services can help reduce the effort required by the consumer, but they also reduce the final amount of compensation. 

Consumer champion Claims Bible explains that you may have more success claiming with the financial provider, rather than the dealership or car maker such as VW. 

The success rate for car finance claims against providers such as MoneyBarn and MotoNovo are far higher than going through the car manufacturer directly. Whilst a claims management company might take a cut of 10% or 20%, they can certainly make your application far stronger and more likely to be approved and compensated, since their commission relies on it and they are more ‘in the know.’

Ultimately, whether it is worth trying to claim back on mis-sold car finance depends on individual circumstances. For some, it could be a chance to recoup costs and correct a wrong, while for others, the lengthy process and relatively small amounts involved might not justify the effort. However, for consumers who feel strongly about the principle of the issue, even a small amount of compensation may make the time and effort worthwhile, especially if it also leads to improved practices in the car finance industry going forward.