Sold a personal loan from a car dealership

ClassicJonesy

Bit of a long shot if anyone can help? Last year my partner entered into an agreement he believed to be a PCP at a car dealership and it turns out it was a personal loan with a mega APR of 8%.

The circumstances were he was sorting out a Mortgage and was told his car payments had to be reduced to a certain amount and then he would be approved but there was some urgency around this. He took the car into a dealership and explained the situation and they of course said they could help. Got the payment to within a £1 of what he needed and was all sorted there and then so he could then proceed with the mortgage.
I wasn't aware of this until I have recently questioned why the car payments were so high which is when he explained the situation around getting this car as it was before we were together.
I said how £275 a month for a Vauxhall was extremely high so we went into another dealership to see if they could help. They put the details in and said that the car wasn't on PCP it was a personal loan. My partner was very surprised that this was the case. As me and the car dealer explained to him ultimately he may have been a bit flustered in a rush to sort the car out but he's signed for it so doesn't really have a leg to stand on. The odd thing was although a personal loan the car was flagging as having finance attached to it still so couldn't then be sold to another dealer. If this was a true personal loan, really he should be able to sell the car if he wanted as long as the loan payments were kept to but this said otherwise. We've since spoken to Sanander who the agreement is through and they said that there was HP on the car. We then pushed as to if it's a personal loan how can there be HP on it. They didn't really give an answer but said they can take the HP off and did so.

My partner is a bit of a gentle giant kind of man but really not clued up on anything like this and I feel that there is an element the car dealer has totally seen him coming and mis sold a product that wasn't suitable for him. Just want to know if anyone else has had a similar experience, if there is anyone to speak to about mis selling or it's just a very bad mistake and just needs to get on with it. Know that may be the case but if anyone can help it would be hugely appreciated.
Thanks

waamo

Just to clarify your story and pull out some salient points is it correct that he signed the documents and had he not entered this agreement you wouldn't have been able to afford the mortgage you now have?

DrEskimo

Yes, HP is the term given to a secured loan on the car, where there are a set number of payments, and at the end of the agreement you have fully paid off the car and own it. It is exactly like a personal loan, however a personal loan is an unsecured loan, whereas a HP is secured on the car. 8% is far from 'mega' IMO...(ironically a PCP with a lower APR will actually cost you more in interest...).

Unlike PCP, there is no balloon payment, so the monthly payments tend to be higher as you are paying off the entire amount for the car, not deferring a proportion of the value till the end (which is based on what the manufacturer anticipates the car will be worth after so many years and with so many miles).

Stop just focusing on monthly cost. It's just an arbitrary number that is easily influenced by upfront payment, term and whether it is a HP or a PCP loan. Your partner is very likely to be in a better position by having a HP rather than a PCP. He is likely paying less in total interest, and he is also paying down the capital quicker, so he likely owes less than the car is worth.

If he needs to free up money in his outgoings to pass affordability checks, he is best off getting a settlement figure for the loan and either paying it off, or selling the car, settling the loan, then using any surplus to bu a cheaper car with no finance.

Scrapit

So he's got a Hp deal rather than a pcp deal. What's the issue?

ClassicJonesy

waamo wrote: »

Just to clarify your story and pull out some salient points is it correct that he signed the documents and had he not entered this agreement you wouldn't have been able to afford the mortgage you now have?

Basically for the mortgage the car payments had to be £275 or less and he was paying about £300 but on PCP

ClassicJonesy

DrEskimo wrote: »

Yes, HP is the term given to a secured loan on the car, where there are a set number of payments, and at the end of the agreement you have fully paid off the car and own it. It is exactly like a personal loan, however a personal loan is an unsecured loan, whereas a HP is secured on the car. 8% is far from 'mega' IMO...(ironically a PCP with a lower APR will actually cost you more in interest...).

Unlike PCP, there is no balloon payment, so the monthly payments tend to be higher as you are paying off the entire amount for the car, not deferring a proportion of the value till the end (which is based on what the manufacturer anticipates the car will be worth after so many years and with so many miles).

Stop just focusing on monthly cost. It's just an arbitrary number that is easily influenced by upfront payment, term and whether it is a HP or a PCP loan. Your partner is very likely to be in a better position by having a HP rather than a PCP. He is likely paying less in total interest, and he is also paying down the capital quicker, so he likely owes less than the car is worth.

If he needs to free up money in his outgoings to pass affordability checks, he is best off getting a settlement figure for the loan and either paying it off, or selling the car, settling the loan, then using any surplus to bu a cheaper car with no finance.

Thanks, thought this would ultimately be the case. Looked at settlement figures etc already so will likely be doing this but thought worth an ask

ClassicJonesy

Scrapit wrote: »

So he's got a Hp deal rather than a pcp deal. What's the issue?

It's neither, it's a personal loan.

Scrapit

ClassicJonesy wrote: »

It's neither, it's a personal loan.

Which is a hp deal. Again, what is the problem.

waamo

Right it appears he has reduced his payment by £50pcm and gets to keep the car rather than handing it back at the end.

This deal enabled you to have a mortgage. Is that correct?

iolanthe07

mega APR of 8%.

An APR of 8% is by no means 'mega' for a personal loan; it is about average.

dj1471

It doesn't sound like the product was "unsuitable", nor have you given any indication of why you think it was mis-sold. Just because he didn't pay attention or bother to read the paperwork he signed doesn't mean it was mis-sold. He took out a regulated financial product from a main dealer, in my experience they're pretty hot on making sure they provide all the necessary information to meet the regulatory requirements and ensure the agreement is watertight. I recently declined finance at a dealership and still had to sign multiple documents to say I understood the advice I received etc etc.