THE PCP could be the product to spark the next major mis-selling scandal, according to car finance experts at the National Association of Commercial Finance Brokers.
The personal contract plan is one of the most common ways that private individuals — and business owners — in the UK finance their cars. Last year alone, an estimated one million cars were purchased using PCPs.
The potential for mis-selling relates to what the NACFB describes as the ‘insufficient, poor, or, in some cases, deliberately misleading’ advice given by car dealers and finance firms when recommending PCPs to car buyers, both new and second-hand.
Graham Hill, board member and car finance expert at the NACFB, said: ‘If the PPI claims lawyers conclude there is enough basis to put forward a mis-selling case on PCPs then, given the huge volumes in which these products have been sold to both private individuals and businesses, the car finance industry could be shaken to its roots.
‘While the PCP in itself can be an appropriate solution for many car owners, as it reduces the monthly payments quite significantly, the issue lies with the way these products have been sold.
‘Were people made aware of the increased interest rate charges on PCPs relative to hire purchase agreements, and were they misled about the prospect of equity, either deliberately or out of dealer naivety?
‘In the majority of cases, I suspect ignorance and confusion among dealers is to blame.
‘But this will not help them and the finance providers behind them if, in the months ahead, PCPs are judged to have been mis-sold. In the event that this happens, a significant number of consumers and business owners could be in for a sizeable cash windfall from the cars, motorcycles and vans they have purchased.’
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