The car finance mis-selling scandal covers a wide range of agreement types, but there is often confusion about which deals are actually in scope. This guide clarifies exactly which types of car finance are affected — and which are not.
PCP — Personal Contract Purchase
PCP is the most popular form of car finance in the UK and is firmly within scope of the investigation. Under a PCP agreement, you pay monthly instalments over a fixed term — typically two to four years — and at the end you have the option to make a final balloon payment to own the car, return it, or use any equity towards a new deal. Because PCP agreements were almost universally arranged through dealerships and funded by lenders operating discretionary commission arrangements, they are the primary focus of the redress scheme.
HP — Hire Purchase
Hire purchase agreements are also within scope. Under HP, you pay a fixed monthly amount and own the car outright at the end of the term with no balloon payment. HP deals arranged through dealerships before January 2021 are subject to the same DCA rules as PCP agreements, so HP customers can also make a claim.
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What About Leasing and PCH?
Personal Contract Hire — commonly known as car leasing — is not covered by the current investigation. PCH agreements do not involve credit in the same way; you are renting the vehicle, not purchasing it on finance. The FCA’s investigation and the court rulings specifically relate to regulated credit agreements, which PCH typically is not.
What About Finance Taken Directly From a Bank?
If you arranged your car loan directly with a bank or building society — without going through a dealership — you are unlikely to be affected. The DCA issue arose specifically where a dealer acted as an intermediary and had the power to adjust the interest rate. Direct lending relationships did not typically involve this arrangement.
Not Sure Which Type You Had?
If you are unsure whether your agreement was PCP, HP, or something else, the easiest step is to check your original finance documents or contact your lender to ask for a copy. Alternatively, use our eligibility checker — we will help you identify whether your agreement is in scope and what your options are.