PCP misselling.

[Ginge R]

C.£30bn in lease sales last year, and with a possible bubble on the horizon, I'd be interested for anyone's thoughts on this and whether or not anyone has successfully complained against a contract.

[Ginge R]

sidicks said:

You can guarantee that, if there's money in it, there will be plenty of people coming out of the woodwork to claim 'mis-selling'.

Agree, and one or two useful pieces of legislation exist to help companies which are sufficiently motivated, insightful and resolute, to turn the unscrupulous hunter into the hunted through criminal and civil means.

But there are some who are probably genuinely unwary. I was asking because I read some lease documents from last year, and the detail was conspiciously light. The guaranteed future value risk warnings were practically non existent and didn't numerate any shortfall consequences, the lease APR was the same as hire purchase - it's my understanding that it's calculated differently with a lease agreement but that wasn't explained, the GAP was sold on the same day (I thought there now had to be a GAP gap, so to speak). The list goes on, so I won't.

If there is a bubble and price drop (were VW trade-in prices affected eighteen months ago because of dieselgate?), there could be problems ahead. I'm not advocating anyone and everyone beats a path to their main dealer. Yes, there will be the ambulance chasers, but there are also the sub prime-esque victims who were flogged a collaterised pup. If the market does fall, there could be problems. Bear in mind we have become used to ultra low interest rates, and most taking advantage of PCP have done so on the basis of low rates (which can now only go one way).

If new PCP becomes unaffordable, if there's oversupply, I was simply wondering if there are likely to be trade-in value consequences that haven't properly been thought through - something most likely to affect those least likely to afford the shortfall. My insight isn't strong enough to have a firm opinion - hence my question. Not for me btw, I decided against leasing and went down the barge route - someone else took the hit long ago, and I've got burr and hide for the price of three or four monthly XF payments.

[Ginge R]

Sir_Dave said:

I was about to say exactly that, the OP appears to be talking about "lease" and "PCP" as the same thing, whereas they are completely different, which is possibly why he isn't seeing early termination clauses in a lease contract, as there wont be any!

I'm certainly not a car finance expert, I was assuming that PCP is a form of just one of many different lease arrangements. Point taken though, I was referring specifically to PCP.

Soov330e said:

NO ONE got mis-sold.

The contracts are VERY VERY CLEAR.

You lay down some money, you make the cheap payments, you limit your mileage to what you said, and at the end you either pay the final payment and keep the car, or you hand it back. Anyone claiming that they didn't know what they were getting into here is an idiot or after compensation for no reason.

Even if affordability checks weren't done properly? What about the consequences and risks of there being an equity deficit or shortfall? I agree that there will be some dishonest claimants if some sort of 'scandal' does develop. I hope they are as treated as ruthlessly as their behaviour warrants.

[Ginge R]

bobclayton said:

With regards to PCP's in particular, it's scary how many people believe that the GMFV at the end of the agreement is what they genuinely believe they're about to be given back for thier next deposit... i.e. returning customers having put down £7k deposits first time round, car has GMFV of say £11k, and expecting that back...always an awkward phone call!

This is one reason behind my opening post. Niece is bright, felt flushed and rushed, and was told that the value was 'practically' (best recollection, admittedly) guaranteed, and that there should be some equity for the next car. She has some unattributable, pencilled jottings on the brochure which show the principle, and which don't suggest negative equity in any of the scribbled scenarios. I'm no apologist for shirking personal responsibility, but I do know my niece - she's a thorough, diligent professional.

She has also got a useful email chain from the dealer which she can take to FOS or elsewhere, and which goes back some years. Before PCP, the dialogue was different, the engagement consultative, forthcoming and transparent (after all, HP is HP). Although there is nothing positively untruthful about the discussions once a PCP was suggested, neither did the saleswoman take the opportunity of correcting some rather obvious wrong perceptions from my niece, or clarifying the risks. The affordability discussion was non existent, which I know is remiss. So, it's fair to say the sales process wasn't conducted particularly well.

So, my niece is, I suppose, a typical consumer. Thoughtful, well intentioned, trusting, relatively scant grasp of the salient points but at the end of the day, reliant on the dealer because she is inexperienced in these matters. She is not unconscionable, and she would never misrepresent her position for unlawful financial gain.

I asked the question because her residuals aren't looking particularly rosy and I'm trying to avert some heartache next year which will coincide with her fixed rate mortgage deal expiring. If the industry is aware that a storm might be looming, is there merit in her (ok, Uncle Al) having a man to man chat with the Principal about it? And if the contract is now half way through - is the consensus then, that at that point, she has options if she elects to voluntarily terminate and can safely ignore letters? I'll take a formal steer too, but I just wanted to establish some facts of my own first.

[Ginge R]

Thanks. I haven't asked about the condition of the car, but I suspect the mileage is going to drift over what was agreed. Which begs another question. If you can't be penalised for breaching mileage agreements, why doesn't everyone just ask for a quote on minimal miles? The dealer could quote a low revised 'gmfv' based on the miles of course, but why wouldn't everyone vt at their earliest PCP option point in order to mitigate the loss, pro rata?

Just a thought. Thanks for your reply.

[Ginge R]

Agree - it wasn't guaranteed as such.

Liberal and lazy use of the word 'guaranteed', and projections which seem to exclude the possibility of a further financial payment don't help though. I'll tread cautiously and carefully.

[Ginge R]

DailyMail said:

If you have repaid more than half of the loan, you can walk away without any extra charges and it won't affect your credit rating — this is your legal right.

Useful (not definitive, granted) summary.

http://www.thisismoney.co.uk/money/cars/article-45...

[Ginge R]

I addressed the issue of 'leasing' quite a few days back.

Notwithstanding that, thank you for your points.

daemon said:

You keep talking saying lease when talking about PCP. They are two different products.

Also i dont get the "The guaranteed future value risk warnings were practically non existent and didn't numerate any shortfall consequences" - at the end of a PCP deal, you can hand the car back with nothing further to pay (subject to fair wear and tear). If there is a shortfall in the value of the car relative to the GFV then its the finance companys problem.

With a PCP deal, you pay a deposit, monthly payments then either pay the residual value or hand the car back.

Its not complicated, its been around since the 1980s and TBH anyone who starts bleating about being "mis-sold" is just hoping for com-pen-say-shun.

[Ginge R]

Thank you. I never even thought to ask that.

Fast Bug said:

And hasn't read the finance agreement they've signed

[Ginge R]

Read this in the FT this morning. You *might* need a log in.

https://www.ft.com/content/d340ea28-5040-11e7-bfb8...

[Ginge R]

You were compelled to go down the PCP route.. to get a discount?

[Ginge R]

I'm not disputing any of that, the regulator has conducted a thematic review into 'Risks to Customers' from financial incentives. I'm surprised that product bias was introduced like this though - it makes the responsibility on the sales team even more onerous.

https://www.fca.org.uk/publication/thematic-review...

[Ginge R]

The regulator gets involved.

https://www.theguardian.com/business/2017/jun/29/u...

[Ginge R]

Although the specifics highlighted in the US are probably not what I was thinking of when I started looking more closely at this (malpractice on such a determined wide-scale at dealers for instance - our various codes of practice and areas of consumer legislation seem to be tighter), there are some areas that might overlap.

https://www.bloomberg.com/news/articles/2017-07-17...