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I've seen a few ads for these and as I've had a couple of PCP deals over the years, I'm intrigued if there's anything worth pursuing.
My limiting understanding is that if you weren't told that the dealer gets commission when the deal was set up, you could be due some form of refund.
I'm not usually a fan of these kind of opportunistic schemes, but free money is free money and I could be due a couple of grand which would be nice.
Any experiences?
Ta
I’ve seen a few ads for these and as I’ve had a couple of PCP deals over the years, I’m intrigued if there’s anything worth pursuing.
My limiting understanding is that if you weren’t told that the dealer gets commission when the deal was set up, you could be due some form of refund.
I’m not usually a fan of these kind of opportunistic schemes, but free money is free money and I could be due a couple of grand which would be nice.
Any experiences?
Ta
I didn't think that was the basis most claims were based on. It strikes me as obvious that theirs something in it for the dealer to use their finance. I thought the suggested claims were about not explaining properly how PCP finance works and that you might get to the end and have a car worth less than the "balloon" payment. To get that sort of payout you'd need to show this was the case AND that you actually incurred a loss, not just that you risked a loss you weren't aware of. But its likely they are trying every argument to (a) try and get payouts to go away (b) find people who are mug enough to give their personal data to ambulance chasers.
Hmm. My wife bought her Clio on PCP. We were assured that they were always worth far more than the balloon payment at the end of term yet despite being in immaculate condition and 10K miles under the allowance the first offer we got from the supplying dealer as a PX was nearly £500 less than the GFV! Even after the GFV was confirmed, that was all they would offer. Fortunately, I'd planned on keeping the car so had been putting money away to cover the balloon payment. Still pissed me off though.
It strikes me as obvious that theirs something in it for the dealer to use their finance.
Depends where you think the profit is. I suspect some people just think that the finance offer is to enable them to shift more cars - the profit being in the car.
I think it’s only relatively recently that it’s become apparent that the car is actually just the vehicle (pun not intended) to sell profitable finance.
Hence why lots of people believe that they will get a better deal if they have the cash ready to pay for it outright.
the first offer we got from the supplying dealer as a PX was nearly £500 less than the GFV! Even after the GFV was confirmed, that was all they would offer.
Did you not ponce it around a few other dealers to see whether they'd do better?
doomanic - There is a difference between a GFV (Guaranteed future value) and a Balloon payment. Please confirm which you had because it makes a huge difference to how a dealer can help you when you come to the end of the agreement.
1) Balloon Payment - 75% of deals are this. You have zero protection because all you are doing is taking a proportion of the finance for example 20k car and putting 10k off until the end of 3 yrs. You pay interest on the 10k borrowed and the 10k put off for later. At the end of 3 years it doesn't really matter if you think its worth 100k or 1k you owe them the balance of that 10k.....Thats when the shit hits the fan.
2) GFV - This is much better. They write into the contract, based on time and mileage and reasonable condition a value. They cant alter that value even if the arse falls out of the market. You know to the penny where you will be at the end of the contract and you are also able to play hardball if, as the market is doing now the market goes up. Your car may be worth more than the GFV in which case you are able to go and sell it elsewhere, pay off the GFV and pocket the balance.
GFV is how we as a dealership are putting on our company van fleets with zero risk when we are not 100% sure of a models value in the near future. Let the manufacturer take the risk, wait the 12mths and then make a decision based on the market at the time. If the value is poor, hand it back, if its worth paying, clear the finance and sell it on used stock.
It was a GFV. Otherwise they wouldn't have revised their PX offer upwards. It was about 7 years ago now; 44 payments on a Dec 2010 purchase. 6k miles PA and the car still hasn't hit 50K now. It had just over 18K on it when the term was up.
If thats the case then this statement is impossible
the first offer we got from the supplying dealer as a PX was nearly £500 less than the GFV!
Why on earth would they make an offer lower than the figure you have in the contract?
I remember the last PPI thread someone predicted this would be the next wheeze.
I'm sure a load of people will be happy to get their money back plus somehow 8% p.a. interest for every year through the last 2 recessions.
Screw buying up property, when [/if] I invent a time machine I'm buying PPI and PCP.
If thats the case then this statement is impossible
the first offer we got from the supplying dealer as a PX was nearly £500 less than the GFV!
Why on earth would they make an offer lower than the figure you have in the contract?
Presumably because I said I couldn't remember what the GFV was. I'm sure they knew exactly what they were doing. I couldn't remember the exact figure, but I was pretty sure it was higher than what they offered me, so queried it. After much running up and down the stairs and "talking to their manager" they managed to "find" their copy of the contract. The salesman we were dealing with was the polar opposite of the really nice chap who sold my wife the car originally and made it perfectly clear he was doing us a huge favour with everything he did.
My wife bought her Clio on PCP.
I bought a Fiesta on ketamine once.
Not doing that again, I can tell you now.
I went to a fiesta on ketamine once, I'm definitely doing that again!
Why on earth would they make an offer lower than the figure you have in the contract?
The finance house set the GFV, not the dealer and the contract is with them. If the dealer doesn't want to buy the car at that price then they don't have to, any more than you have to sell it to them. Any number of reasons for that, maybe it's not in great condition, maybe it's over mileage, wrong colour or maybe the GFV was too high in retrospect - plenty other reasons too.
Another dealer might offer more, but failing that, the car will be handed back to the finance company.
It was bought on Renault finance and everything was done in house by the salesman up to the credit check.
The problem was that dealers were telling people who could have qualified for lower APR's they could only get finance on higher APRs to pocket the extra commission and / or grossing up the APR from the bottom line figure for the same end.
Grossing up commission is a massive TCF issue particularly when dealing with the consumer side of regulation.
The FCA has done an extensive market review into it all and their findings were really quite damning.
This explains the issue quite well:
https://www.grantthornton.co.uk/insights/motor-finance-finds-itself-in-the-fcas-headlights/
Basically car sales people were paid more commission if they got people to take out loans at higher percentage rates, and they had influence over the setting of those rates.
The FCA found this lead to overcharging by around £1000 per contract and the practice has now been banned.
So unless the sales person said they were getting paid more if you took it a loan at a higher rate then that's the basis for misselling.
Omg. You guys really are talking rubbish. 25yrs of it. I used to put my own packages together before they even became main stream.
If you have a GFV then it isn’t a negotiation down unless your car falls outside the terms of the contract. If any dealer is stupid enough to offer less than the GFV on a car they sold originally then run a mile, they are bloody idiots. It’s in their interests to tell you to just hand the car back to the finance co.
It’s a number written in the contract at which point you can just call it quits and leave the keys. It’s ‘supposed’ to be the point to be talked up from, not down.
Iamtheressurection you question my statement then answer the blooming point. Of course it’s the finance co who set the GFV and yes no dealer has to offer that figure. BUT WHO ON THIS PLANET WOULD ACCEPT LESS THAN THE GUARENTEE?
Here sir it’s written in the contact that your GFV is £5k but we are going to offer you £4500. Therefore the £10k car you are going to buy is really going to cost you £10.5k. I think I will just hand the keys back then and buy the new car at £10k. Err ok then…..
Oh and anyone on a PCP at the moment. You GFV was probably worked out well below current market values. Going to be some very happy people at the end of those Contracts as long as they don’t just hand it back.
My wife's got a PCP until March next year, they contacted us in March gone and asked if we'd considered changing at 2 years but only offered us ca £200 over the remaining settlement figure. I plugged details into WBAC and they were a bit better, about £500 over, and we considered selling to them and starting a lease - although we've had PCP's we've never really had any intention in buying the car at the end and have just used equity as the start for a new PCP. But then didn't for various reasons.
Since then WBAC are constantly emailing and texting, and their offer is now over £1000 more than it was 7 months ago, in the meantime I've paid another £1000 off the instalments so we've probably got £2500 equity (minus the £1000 paid of course but that was in the budget anyway)
So the question (and agreement that our GFV is looking healthy) is how long will the bubble last for? Will it hold till the end, another 4 months, or do we cash in now?
Iamtheressurection you question my statement then answer the blooming point. Of course it’s the finance co who set the GFV and yes no dealer has to offer that figure. BUT WHO ON THIS PLANET WOULD ACCEPT LESS THAN THE GUARENTEE?
I’m confused. Where did I say (or imply) anybody would accept less than the GFV? That’s a completely separate point and I have no idea what you’re getting so caps locked about.
I simply wrote it in response to you saying, and I’m paraphrasing: that’s impossible, why on earth would a dealer offer less for the PX than what’s in the contract.
We both know that’s not always the case, and that when it happens, cars generally go back to the finance house or get refinanced and kept.
Luckily the GFV has nothing to do with why the claims farmers are getting involved in ‘mis-sold’ car finance so can be ignored for the purposes of this thread 🙂
I couldn’t remember what the GFV was
So you didn’t think to look at your contract?
Couldn't find it.
Some ‘interesting’ comments around PCP’s or ‘Balloon’ finance agreements here. So to clear a few things.
A PCP is not the same as a hire purchase agreement with a balloon. So to confirm
HP with Balloon - This is as is called, you borrow a proposition of the advance with an agreed final bill payment. As an example 3yr agreement. 35 months at your regular payment the 1 final payment of the balloon. It’s a way of reducing payments and offsetting the final payment/balance
PCP - Is only similar to the above in that a proportion of the loan is offset. It’s cited as a ‘GFV’ or guaranteed future value, as that’s a sexier way of selling it. But it’s basically a calculated residual value, based on the mileage you give at the start of the contract. The only thing guaranteed about it, is the figure itself. There are no guarantees as to the car being worth that amount, they can’t guarantee the future of the market! So in essence the hirer pays an agreed monthly rental and then at point of end of contract they have 3 options
1) pay the agreed balance - take ownership of the car
2) part exchange the car for a new one (dealer will settle the GFV)
3) hand the car back and walk away - finance company will collect. But the car will need to be at or under the contracted mileage and condition should be aligned to BVRLA standard for fair wear and tear.
MOST dealer financed vehicles now are financed via PCP or straight HP. HP with a balloon is not something I have seen used in great volumes for some time, other than on some more exotic/higher value vehicles l.
At no point should anyone buy a car on PCP expecting there to be ‘loads of equity’ at the end of the agreement. The valuation provided in the GFV is what they believe the car to be worth. If they had under valued it to give you equity at the end of the agreement then your monthly payments would’ve gone up!! Remember there is no Witch craft, ultimately you are just offsetting a proposition of your loan advance to make the monthly payments cheaper.
As for claims…there are new claims launched each week aimed at the motor trade. It’s become the new ambulance chasing market. I believe the sale of PCP is the headline, but in reality the challenge will really be around dealerships being targeted to up sell on finance rate to earn commissions, rather than how PCP’s we sold.
Yep, it's about commissions, not any issues with GFVs. If you're making a claim you're effectively saying "Oh, I had no idea the dealership was paid a commission on the finance deal they arranged for me, I assume all their profit was in the car I bought. I demand compensation... because reasons".
As for the GFV, as someone said, it's between you and the finance Co. if you have a car that they're only prepared to pay £4500 in part-ex for and it's GFV is £5000 then they may not tell you "oh, you'll save £500 just giving it back" and risk pissing their customer off.
That said, IFAIK most PCP deals end in a part-ex, it allows the owner to avoid all the worries of return condition, mileage etc and the dealer has another way to make a couple of hundred quid out of the deal. If you want to squeeze every penny out of it, then you could always try to sell it privately, but it's a hassle, you might be without a car for a while, or paying for two.
Back in the early 2000s I used to write unregulated (because they were over £25k and that was the rule back then) HP with balloon deals, they were a very cheap way to buy an expensive car, but risky and sometimes ended in tears. If they allowed that sort of thing to be available to the masses via dodgy dealers it would be carnage.
If you’re making a claim you’re effectively saying “Oh, I had no idea the dealership was paid a commission on the finance deal they arranged for me, I assume all their profit was in the car I bought. I demand compensation… because reasons
Not quite. The dealers were intentionally selling loans at higher APRs than some applicants could benefit from for higher commissions. Ie, Mr & Mrs Good Credit Rating were paying say 5.5% instead of 3.5% and consequently paying more per month than they qualified for without being told that and simply to line the dealer's pockets.
That is not on and goes against every rule in the FCA's TCF handbook. And, more importantly consumers were financially disadvantaged by the practise.
Who are they chasing? The dealers themselves or the finance houses? Seems like the costs would be enough to put smaller dealership out of business if they've been consistently dodgy. Not suggesting that is unfair - but if the owner realises this early they'll potentially cut n run and the consumer will get nothing? Have the larger dealerships really been daft enough to fall in the trap? Its a long time since I bought a car at a dealer and I think only once used their finance, but there was definitely compliance paperwork back then (nearly 20 years ago?).
@poly - it is the dealers. The Finance Co's say along the lines of 'if you sell at 3% APR you with get 1% commission, 5%, 2% commission etc...'
The dealer looks at it and goes 'hmmm, Mr & Mrs X could get 3% but I only get 1%. I will just tell them computer says 5%...'. As you start getting into the realms of those with poorer credit ratings then the commission becomes even more lucrative and the consumer even less suspicious of high APRs (and perhaps more desperate for finance).
NB the figures I use are purely for illustration purposes and yes, the amounts being claimed could well put a business under. Whilst they may carry PI insurance which may well respond to something like this any policy will likely have a £2500 or £5000 each and every claim/claimant excess on it which again would be enough to put some firms in trouble.
If a firm failed then the FSCS would step in and cover the claim in most instances.
And yes, the larger dealers have been daft enough. Well at least their zero hours contracted commission based remunerated employees have. Why wouldn't you?!
Note this is very much a specialist subject. Underwriting PI for mortgage and finance brokers is what I've done for 20+ years...
theotherjonv - thats a crystal ball question but tbh 4mths is not going to clear up the massive shortfall in used stock which is why they are contacting you to change your car. There is no miracle pile of new stock coming through either. I know 2022 will be much the same problems as 2021 so its not going to improve 'much'. What may happen is some contracts finishing and some used stock hitting the market from time to time. So if you do a deal now, chances are you will get a good deal but possibly not get a nice replacements as you would like.
Personally i dont look at cars as cash cows. I did PCP on my wifes car, paid 0.3% finance rate and paid it off at the end and kept it. You will always be better off selling your car privately/WBAC than trading in but the gap should be much smaller now seeing as dealers are desperate for stock. Just dont play games like not remembering your GFV etc. These days we ask people how much they want. If its reasonable and we can do the deal we just give them it. There is zero point and time in playing games and we want to deal with honest people, not players.
@poly – it is the dealers. The Finance Co’s say along the lines of ‘if you sell at 3% APR you with get 1% commission, 5%, 2% commission etc…’
The dealer looks at it and goes ‘hmmm, Mr & Mrs X could get 3% but I only get 1%. I will just tell them computer says 5%…’.
Mmm... you see if I was looking to point the finger of blame somewhere I'd be point to the Finance Co's saying - you incentivised them to do this, you could easily have put a few lines of code in to stop it happening, you profited so you pay!
As you start getting into the realms of those with poorer credit ratings then the commission becomes even more lucrative and the consumer even less suspicious of high APRs (and perhaps more desperate for finance).
Yes - or at least that those with good ratings are potentially a bit more aware and so likely to shop around.
If a firm failed then the FSCS would step in and cover the claim in most instances.
Who pays then? the government? so we all pay because a dealer was greedy and the punter didn't have the nouse to google what a fair rate was, meanwhile the people really profiting from this are the Ambulance Chasers... mmmm...
I'm not so sure getting a payment out of he FSCS will be quite so simple though. Mrs P had a PPI claim rejected because the mortgage broker who told her the PPI was mandatory (which RBS say it was not) was no longer in business and FSCS eventually just said - we have no records to confirm the reason you were sold it. There may have been an appeal route - but I suspect like many she decided it was flogging a dead horse at that point.
And yes, the larger dealers have been daft enough. Well at least their zero hours contracted commission based remunerated employees have. Why wouldn’t you?!
I just presumed everyone selling finance now made all their staff jump through hoops, and customers sign a load of bits of paper so when a claim is made the company can say - the staff were trained, they were told not to do bad stuff and the customer signed to say they knew there were other ways to get finance so not our fault.
Note this is very much a specialist subject. Underwriting PI for mortgage and finance brokers is what I’ve done for 20+ years…
I'm kind of amazed you can get insurance for it. Seems a bit like insuring 17 year old boys on a souped up hot hatch in the worst area of the country... not so much if you'll get a claim, more a case of when and how big!
@poly - the FSCS is funded by all the various finance brokers, IFAs, banks, insurance co's etc. They all pay a levy toward the fund. The FSCS will go after Directors who have profited from mis-selling too and recoup money from personal assets etc.
I agree that the finance co's had a part to play however it is the dealers that did the actual mis-selling to the detriment of the consumer. And, more importantly, it is the dealers who were the FCA would expect to have robust systems and controls in place to stop this kind of thing happening.
And yes, you would expect there to be hoops to be jumped etc but compliance costs money, it does not make money, and is often ignored.
It is an interesting area of insurance to work in and you have to know what you are doing as underwriters to spot evolving trends, predict where mis-selling may occur, charge the correct premiums for the risks etc. And yes, claims do happen and es sometimes they are crunchy 🙂
danny,
do other counties have these misselling scandals? obviously in the US there's class action law suits for everything - but in Europe is financial misselling a UK problem or does it happen elsewhere too?
Ooo - good question. I know Australia has had significant issues with mis-selling however I am not sure about much of the rest of Europe.
I think some of it is a cultural thing; sales tactics are very aggressive in the US and UK and Australia seems to mix the worst of both cultures up when it comes to such things, and the laws that govern them.
In the UK for sure, give sales staff a target and remunerate them for hitting that target or on commission and they will often do anything to achieve it. Not always of course but there is a culture of finding loopholes etc to 'win'
I can't think of any examples say from the Far East although I could be wrong.
I wonder if the next claims will against the current claim chasers?
"Been charged 25% claim fee on endowment/PPI/PCP when it should have been 10%? Call us now....."
I wonder if the next claims will against the current claim chasers?
“Been charged 25% claim fee on endowment/PPI/PCP when it should have been 10%? Call us now…..”
It is already happening. Both for high fees and also 'did your last claims management firm win as much as they could have done'...
Isn't squeezing as much profit as possible out of a customer a salesperson's main job? And you know, car dealers, hardly renowned for their honesty! 🙂
Whether that's on selling finance, cars, kitchens, bathrooms, hot-tubs - anything really!?
Most people won't even look at the APR, they'll look at the monthly figure and decide if they can afford it or not.
Isn’t squeezing as much profit as possible out of a customer a salesperson’s main job?
Thing is there are pretty strict regulations around selling financial products to consumers to help prevent them being ripped off...