PCP excess miles and VT

barclaysbill

Hi All

My partner is in the position where she has a 3 year PCP contract for a car with a 6,000 mile PA allowance. Her circumstances have since changed where she is now driving approx 14,000 miles per year.

She now has 16,000 miles on the clock and about 15 months to go on the contract.
The excess mileage charge is 9 pence per mile.
I calculate that the excess mileage charge will be approx £1300 if current usage continues.
The cars brand new price was approx £8,000.
A deposit of £1000 was paid.
Payments are £100PCM
She does not wish to keep the car after the contract ends.

My understanding is that she has several options.

1. Give the car back at the end of the deal and suffer the excess mileage sting.
2. Buy the car at the end of the deal, then sell it privately.
3. Voluntarily terminate (VT) the agreement.

I know each has its pro's and cons , however I've been doing a lot of research on the VT option. It appears that the Consumer credit act states that you pay 50%, hand the car back and that's the end of your obligations. Excess mileage clauses / obliagtions do not apply.

It appears that some finance companies will fight this tooth and nail however. People state that their credit files have been shown in default and excess mileage sums have been passed to debt collectors. This appears especially true when there is a large excess mileage, which will be our case.


Any advice would be greatly appreciated.

F1F93

Two more options:

4. Part ex the car against another, using any excess value over the amount remaining to pay off the finance

5. Call the finance company, modify the finance agreement for more miles. I know I can definitely do this with VW, I presume other manufacturers wont have any issue with this.

I'd personally go for number 5.

motorguy

6. Set aside an amount per month equal to the excess mileage charge (this may work out cheaper than changing the finance agreement)

System

What is she planning to do for getting a car when she VTs?

AnotherJoe

The “loophole” whereby you don’t have to pay the extra mileage charges upon VT has been challenged and so far the challengers are winning (which seems fair enough if you think about it dispassionately)

I suggest she examines options 4,5, and 6 above and picks one.

mark55man

other options - can your partner

* use public transport at all, although at 9p a mile excess that would most likely be more expensive
* car share - there are more schemes than you might think
* change of circumstances back - ie move to be nearer to work or whatever, or work out a way to claim for the extra miles,
* buy really cheap runaround and split the mileage (9p a mile might be savable then)
* swap car alternately with family or friends with shorter journeys as named driver (not fronting as is only part time, but check)

BUT really - I think you just need to put aside the extra. £1300 is a lot of money but you will be adding that much depreciation to the car

neilmcl

AnotherJoe wrote: »

The “loophole” whereby you don’t have to pay the extra mileage charges upon VT has been challenged and so far the challengers are winning (which seems fair enough if you think about it dispassionately)

I suggest she examines options 4,5, and 6 above and picks one.

"Challenged" by who and what actual evidence do you have that "they" are "winning".

System

Financial Ombudsman ruling:

Decision Reference Ref: DRN4586868
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=65660

complaint
Mr T complains that after he voluntarily terminated a hire purchase agreement,
FGA Capital UK Limited (FGA) is unfairly asking him to pay excess mileage charges. He
says that this is contrary to section 100 of the Consumer Credit Act 1974 (‘the Act’).
background

Mr T entered a hire purchase agreement with FGA to purchase a car in July 2011. In
December 2013 Mr T voluntarily terminated the agreement. FGA advised that he remained
liable for £58 damage to the car and £1,846.47 in excess mileage charges.

Mr T accepted that he was liable for the damage charge and sent FGA a cheque for £58,
advising that the payment was in full and final settlement. The business did not inform Mr T
that it had not accepted the payment as settlement of the agreement but continued to pursue
him for the outstanding excess mileage charge.

Our adjudicator did not recommend the complaint should succeed. She considered that the
excess mileage charge was in accordance with the terms and conditions of the agreement,
therefore she concluded that Mr T was liable for the additional mileage charges.

Mr T disagrees with our adjudicator’s assessment. In summary, he says that the excess
mileage charge is not in accordance with section 100 of the Act. This complaint has been
passed to me for final determination.


my findings

I have considered all the available evidence and arguments to decide what is fair and
reasonable in the circumstances of this complaint. Having done so, I do not uphold the
complaint.

Mr T does not dispute that he was liable for the £58 damage charge and he has already sent
FGA this payment. However, Mr T says that the excess mileage charge is invalid as he had
paid over 50% of the finance agreement and in accordance with the Consumer Credit Act;
he has nothing further to pay.

Section 100(4) of the Act merely says that reasonable care must have been taken of the
goods; I consider that in addition to damage beyond wear and tear, mileage limitation is also
a fair measure of what is ‘reasonable care’ of a car. Therefore, it follows that I do not
consider excess mileage charges to be contrary to the Act.

I am satisfied that the hire purchase agreement which Mr T has signed clearly states an
excess mileage charge of 12p per mile will be payable should he exceed 27,000 miles per
year. I am also satisfied that Mr T would have had a fair opportunity to inspect the hire
purchase agreement before agreeing to be bound by its terms. I do not consider this
particular mileage limitation term to be unfair, and had Mr T been unhappy with it he could
have decided not to enter the agreement.

Overall, I am not satisfied that the charges are unreasonable or contrary to the Act. I also
agree with the adjudicator that the charges have been fairly applied. Whilst I note that FGA
did not inform Mr T that it had not accepted his cheque in full and final settlement of the
agreement; I do not consider that there are any grounds for me to instruct FGA to waiver the
additional mileage charges. It follows that I have no grounds to instruct the FGA to pay any
legal costs incurred by Mr T, pursuant to his complaint.

I appreciate that Mr T will be disappointed with my decision. However, he does not have to
accept my findings and may pursue this matter by alternative means, such as court, should
he wish to do so.

my final decision

My final decision is that I do not uphold this complaint.
Karen Dennis-Barry
ombudsman

neilmcl

The FOS only give an opinion, they don't make or adjudicate the law. The above was one persons opinion and, in my opinion, could be challenged in court.

TheMoonandBack

Anyone who has managed to avoid excess mileage charges by VTing has exploited a loophole. As the example posted by Tarambor shows, a reasonably objective examination by the ombudsman resulted in the mileage charges being upheld.
Most people select the lowest possible annual mileage on a pcp to get the lowest possible monthly payment. If you end up doing more mileage you should pay the charge, not doing so and then VTing is having your cake and eating it - nice if you manage it, but not really the right thing to do.

motorguy

AnotherJoe wrote: »

The “loophole” whereby you don’t have to pay the extra mileage charges upon VT has been challenged and so far the challengers are winning (which seems fair enough if you think about it dispassionately)

I suggest she examines options 4,5, and 6 above and picks one.

No. They're not winning. The Financial Ombudsman may rule in favour of the "challenger" but their rulings arent legally binding.

(as far as i know) no finance company has ever taken it to a court of law.