Millions who bought a car pre-2021 could be due a payout as mis-selling investigation launched

Grumpy_chap

If an individual bought a diesel car on PCP, can they claim and be refunded the entire costs of everything ever twice?

jimjames

Yet again I'm missing out on compensation by being sensible. Avoided PPI because I could see it was a waste of money so missed out and only own cars I can afford so miss out again. I need to take less responsible decisions and start getting some cash!

LightFlare

I interpret the article/issue slightly differently.

The way I read it, is that companies inflated prices specifically for customers that took out finance and/or weren’t transparent about commission they received from said finance.

I think the article is written very poorly when it goes on about people being “mis-sold” 

Its more about them not being transparent and using smoke and mirrors when selling their finance products

motorguy

My understanding is - there may have been people who were only offered a more expensive finance option because the dealer stood to earn more commission if they took it.

THATS the mis-selling. 

IF it can be proved.  

NOT because someone has taken out a PCP deal, NOT because they think the rate was too high, NOT because they didnt read the paperwork, NOT because they think because they live in claim culture britain they can claim for every decision they made.

motorguy

jimjames said:

Yet again I'm missing out on compensation by being sensible. Avoided PPI because I could see it was a waste of money so missed out and only own cars I can afford so miss out again. I need to take less responsible decisions and start getting some cash!

Having taken out PPI was not mis-selling in itself.  It was being told you had a better chance of getting finance IF you took it out (i can remember decades ago applying for a loan by phone and being told that.  It seemed to happen as a matter of course).

Likewise, having had a car on PCP does not entitle someone to compensation.  It is IF the dealer purposely sold them a finance deal at a higher rate because they then got a better commission.

Silenced

Your lender and car dealer (acting as a credit broker) had what's known as a 'discretionary commission arrangement' in place – where the higher the interest rate you were charged, the more commission the broker would get.

How would you actually know this was the case to be able to raise a complaint?

daveyjp

Silenced said:

Your lender and car dealer (acting as a credit broker) had what's known as a 'discretionary commission arrangement' in place – where the higher the interest rate you were charged, the more commission the broker would get.

How would you actually know this was the case to be able to raise a complaint?

Checking what was agreed against what was actually on the order for the car.

There are many factors in a car loan calculation which can be manipulated which don't change the monthly payment, so the buyer doesn't realise what is going on and keeping track for the lay person who doesn't deal in car buyimg and loans tricks every day is none the wiser.

Price of new car
Trade in
Deposit
Loan amount
Loan term
If a PCP guaranted future value
APR

Then eventually you get a monthly payment.

If you lower the loan amount by increasing trade in, but increase the APR, or increase the term the commission can be higher.

When the salesman 'disappeared' to see the 'manager' it is likely they were actually going through different calculations to change the variables to increase their commission.

I've had it where a cost to change figure has been agreed (I was paying cash) based on trade in v new vehicle price, but when the final invoice is prepared there have been changes to both figures to keep the new car discount lower, this was done by reducing trade in price, but the cost to change was the same.  No financial,loss to me as it was obvious, with HP or PCP loans it is much harder to see, especially after 3-4 hours in a dealership.

K_S

Thanks for reporting this MSE. When the FCA announced this, it didn't get the coverage it deserved.

There are clear rules and regulations that firms providing/broking/arranging consumer finance (almost all forms of it including car finance) had to follow in 2021 and many years prior to that, including the principles-based TCF.

And where firms haven't done what they should, or chose a more expensive option to get a bigger commission, there should be consequences, it's that simple. And I say this as someone who works in a related industry that is subject to many of the same rules and regs.

If I recommended a more expensive mortgage with lender Y instead of lender X, while the applicant qualified for both, and my reason for doing do was that lender Y paid me a higher proc fee, that is mis-selling. As it is if I deliberately tweaked other factors in the advice process to point to lender Y instead of X.

There's no such thing as 'caveat-emptor' in consumer finance in the UK, nor is there the expectation that if an applicant signs on the dotted line then anything goes. I can't get a regulated client to sign away their rights or waive my obligations.

The firms selling these products know all this and if they played fast and loose with their regulatory obligations to earn more commission, that's on them.

motorguy

daveyjp said:

When the salesman 'disappeared' to see the 'manager' it is likely they were actually going through different calculations to change the variables to increase their commission.

I've had it where a cost to change figure has been agreed (I was paying cash) based on trade in v new vehicle price, but when the final invoice is prepared there have been changes to both figures to keep the new car discount lower, this was done by reducing trade in price, but the cost to change was the same.  No financial,loss to me as it was obvious, with HP or PCP loans it is much harder to see, especially after 3-4 hours in a dealership.

Its very typical for a salesperson to "disappear" to see the "manager" as almost always the salesman has no authority to offer discount / work on the trade in value.  That will almost always have to be signed off by the sales manager.  When we bought my wifes Z4 used, the salesman had to go back to the manager 3 times before we finally agreed on the level of discount and trade in value (and that was a cash sale, no finance).

Dealers will tweak the selling price and trade in price for the invoice.  They will use some of the discount they have to offer on the car you're buying to bolster the value of your trade in verbally or for any initial quote.  When it comes to invoice time you get to see the raw figures.  The dealer pays VAT on your purchase through the VAT margin scheme (so basically they pay VAT from their gross margin), so keeping the price of the car you're buying as low as possible reduces their VAT burden.  

The APR you are paying should - and is now required - to be explicitly told to you.  It should be very clear on any paperwork or quotes.  They should absolutely not be tweaking the APR upwards "behind the scenes".

Where the commission element comes in to play is when a dealer has multiple finance companies who are offering finance, and they can offer you a 4.9% APR deal (getting them say £100 commission) but offer you a 5.9% APR finance deal from a difference finance co (who pays them £200 commission).

Where it may be quite prevalent is in franchised dealers whereby they are incentivised by the manufacuter to use their used car finance (either by direct commission or by targeting them per quarter to a certain amount of finance deals) and the dealer offers only that to the customer, when they have another finance co on their books who could offer a lower rate.

sheslookinhot

gembob33 said:

I bought a car in 2012 and had car finance through the dealership. I have no documentation anymore due to it being so long ago. All I have is an email saying thank you for buying a car with us. Is there anyway I could request the documents from the dealership? They have now changed from polar ford to trust ford. 
Help needed

What “help” do you need ?