Was your car finance unaffordable?
The FCA, who regulates car finance lenders. and the Financial Ombudsman (FOS) say:
a loan is only affordable if you can make the repayments on time, without hardship and still meeting your other commitments.
That means you need to be able to pay all your other debts, your normal household bills and expenses as well as the new car loan payments.
You may have made your car finance a top priority as you don’t want the car to be repossessed. As a result you may have had increasing credit card balances, more loans or got behind with bills. That means even though you kept making the payments, the finance was not “affordable”.
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Affordability checks
A lender should have checked you could afford the car finance. This may mean checking not just your credit record, but also your income and expenses as well.
These checks have to be “proportionate”. If you have got a great credit record and a good income and are only borrowing a small amount, the lender isn’t going to have to look in great detail to be confident you can afford it.
But with a poor credit record, or where the repayments will be a large proportion of your income, better checks are needed. The FCA rules don’t say exactly what has to be done, but a lender often can’t rely on what the customer says their income and expenses are. Other ways to check include:
- your credit record shows what you are paying to other debts each month;
- there are national average figures for some expenses, so your estimate that you spend £60 a month on food or nothing on clothes isn’t realistic;
- the lender could look at payslips or bank statements to be sure.
These checks are often inadequate
The regulator thinks some car finance lenders are not checking properly for affordability. In 2019, the FCA said:
Here is an extreme case ‘Car payments are ruining our lives’ where a 23 year old student with a part-time job was sold a 21k Audi on finance, with apparently no affordability checks at all.
But it’s probably more common that a quick and inadequate check was done.
A car finance expert makes a lot of excellent points in this article: The car industry need to be more honest when selling car finance. He says:
It’s time for the car industry to do better, even if it’s to save customers from themselves.
“Affordability” is a test of your situation when you took the finance
The car finance company may have done a good assessment of affordability. At the start, you may have been able to manage the loan repayments.
Then something went wrong – perhaps you had your hours cut, or you split up with your partner. Or rising bills in 2022 mean what was manageable before isn’t any more. Here it’s not the lender’s fault that the car finance is now unaffordable and you won’t win an affordability complaint. Read Can you afford your car finance payments? which looks at your options in this situation.
But should the lender have seen that the loan was too expensive at the start if they had looked properly when you applied for the credit?
In this case, you can make an affordability complaint to the lender.
How to make a car finance affordability complaint
The affordability rules for car finance are the same as for other loans. So you can follow the approach and use the template letter for an affordability complaint in this article: How to ask for a refund from large, bad credit loans.
The template letter in that article asks for:
- a refund of the interest on the finance;
- for the remaining balance to be repaid at an affordable rate; and
- for any negative marks to be removed from your credit record.
If you have other serious complaints about the car, such as poor quality, you can add those into the standard affordability complaint letter.
A lot of lenders reject even good complaints. So don’t be depressed if this happens – just send it to the Financial Ombudsman – the process is all described in the above link.
What happens if you win the complaint?
If you win an affordability complaint for a normal loan, you get the interest refunded and if the loan is still running, your balance is reduced. It’s more complicated with car finance complaints.
You may wonder what happens if your car was repossessed and you had paid little or no interest?
If you still have the car finance, will you be able to keep the car?
See Car finance affordability – what you get if you win a complaint which looks at the different situations and what the ombudsman usually decides. It has some links to Ombudsman decisions – including one for a brand-new BMW!
Still have the car? You must keep paying the car finance
These complaints may take many months. You will have to keep up the loan repayments during this time, or your car may be repossessed.
Read Can you manage to pay your car finance? which looks at your options when you don’t think you can keep on paying while the complaint goes through.
“Dieselgate” – a totally different sort of claim
You may have seen ads saying you may be able to get £,000s back as diesel cars were mis-sold because they produced more harmful emissions than advertised. This is a totally different sort of claim.
MSE has written a good article on these claims, with a list of the law firms you can use and what they charge. This is not a complaint you can sensibly try to do yourself. I have no idea how likely a payout is and it may take a long while.
Get interest refunded from large loans
Which debts are top priority?
How to end your car finance early
B says
Hi Sara, are you able to assist please with the initial findings of the investigator?
I appreciate you may not have known PCF could have been responsible for the situation you were in. But as confirmed the regulator’s rules ask us to not only consider when you knew, but also when you ought reasonably to have known you had a reason to complain.
Your testimony confirms that at the point of application, PCF reviewed your payslips and carried out a credit check. You’ve also told us you had to prioritise payments for the PCF lending because you needed the car for work which resulted in you missing other commitments.
I don’t doubt what you’ve said about not knowing you could make a complaint about irresponsible lending until recently. However, because PCF carried out a credit check and reviewed your payslips at the point of application, I think this ought to have made it clear PCF were carrying out checks to see if you could afford repayments. So, when you started missing payments on your PCF agreement between 2017 and 2019, you should have known PCF may have been partly responsible or that something was wrong – because of the checks they carried out at the inception of the lending.
I actually made majority of payments in 2017 and 2019 and have repaid the loan, however was only aware in May that I could complain when I read your website. I have made other complaints. Is there any response you could assist me with at all please?
Sara (Debt Camel) says
yes, go back and say you thought the credit check and payslips were PCF assessing what risk they would be taking on by lending to you, and that this was always lowish because this was a secured loan on the car.
You had no idea PCF were suppose to work out if you could afford to repay the debt and manage all your other commitments. So when you missed the odd payment, it was very stressful as you needed the car and your only concern was to make the payment up. It never made you wonder if there was something wrong the original checks PCF had made.
Ask for this to go to an Ombudsman if the investigator doesn’t change their mind.
B says
Thank you, I will do.
Laura says
Hi Sara,
The adjudicator has calculated my income and expenditure for the 3 months leading up to my application by using the pay I received at the end of each month against the expenses I had during the same month, for example 31st July payment for July expenses/outgoings. When in reality when I was paid on 30th June it was to cover expenses in July as I lived month to month. It might not seem important but if my argument is accepted it significantly reduces the total amount of income I had in the months leading up to my application as my wage varied and could change the outcome of my complaint. Do you think this is a fair argument as it was a true reflection of my financial situation at the time.
Thanks
Sara (Debt Camel) says
I think you should make this argument but I don’t know what the adjudicator will decide.
David says
Hello Debt Camel!
I have a question on my current hire purchase agreement.
I used 247 carfinance and zuto to search for a new agreement in approx Feb 2022. I already had a car with another lender but had paid most of it off so the idea was to refinance, part exchange and settle any difference. The car I ended up taking was about 1 hrs 30 mins drive away in Yorkshire (I live in lancs) and when I got there the dealership actually almost enforced their own lender on me. As I’d driven so far and it all happened so fast I went ahead as the deal was still good for what I was exchanging and getting. Hindsight, not a good idea I suppose.
Everything was fine repayment wise until Jan 204 when I missed a payment because I got a bonus from work but didn’t budget well enough as the following month it meant our universal credit payment was reduced and I couldn’t afford all my commitments. We eventually agreed to split the month missed across the next 12 months starting Feb 2023.
During that correspondence the lender detailed that they had a concern about affordability, but why would they ask this please, having already lender to me and if anything my circumstances hadn’t really changed for better or worse, it was just the one budgeting mistake I made over that period.
I’m now a few months away from paying 2 years finance back and have been considering a further refinance as my circumstances are now better than they were in Feb 2022 when I first took out this new agreement.
1/2
Sara (Debt Camel) says
what is the interest rate on your current finance? is it HP or PCP?
David says
My question was more about whether I should query this further or not really. If there was a point when they assessed me and felt it might not be affordable, why did they accept me in the first place?
It’s hire purchase, 10.7k car value, opening loan value is 15.2k and I currently owe approx 8k. On approx Feb 2024 I will have paid more than half the value.
Sara (Debt Camel) says
Do you feel the finance was unaffordable? That is what matters, not some stray remark to you.
David says
Personally yes but I only took out the new loan to get out of the previous lending which I had felt was high already, and the fact I went with a car finance broker and then to have the dealerships finance shoved in my face without any prior warning felt quite forced.
Sara (Debt Camel) says
Well I understand this feels annoying. But if it was a good deal and you feel it was affordable, it isn’t clear that you will win any complaint.
David says
Even when the dealership pretty much forced their lender on me when I’d already had an agreement in place via a broker?
Sara (Debt Camel) says
I can’t say you won’t win a complaint. but it isnt clear to me what you lost by this?
Steve says
Hi Sara, are the below calculations correct, I just want to ensure they are taking into consideration I paid a £1000 deposit. Blue Motor Finance were the lender and I must say they behaved impeccably in terms of paying out etc.. I’m just a bit confused about the deposit bit..
I have calculated your redress amount as a total of £7,493.04. – This is what I received
Their breakdown:
Your refund has been broken down as follows:
£6,581.38 – Treat payments made over and above the purchase price of the car as overpayments. Any overpayments should be refunded. Vehicle price was £21,450. Total payments made = £27,031.38 plus deposit of £1000 = £28,031.38. Difference is £6,581.38;
Plus 8% simple interest = £911.66 (£1139.57 gross – £227.91 tax). Many thanks for your help.
Sara (Debt Camel) says
do you agree with all the individual figures?:
– the car cost £21,450
– you paid a deposit of 1,000
– monthly payments of 27,031
–
Steve says
Yes they look correct to me, thank you for getting back to me
Sara (Debt Camel) says
In that case the sum the have done (deposit plus month payments less the car price = refund before 8% interest) looks correct to me.
Nice result.
Steve says
Thanks so much Sara
Johnn says
Hi Steve great result, I’ve won mine today and blue have emailed me for bank details but they haven’t sent me how much the redress is. If you don’t mind me asking did they ask for your details first then send the redress amount? Also how long did you wait after the initial email off them to get the redress. Thanks in advance
Steve says
Best company I’ve dealt with in terms of redress, all done and dusted in around a week
MM says
Hi Sara,
I was just wondering if you could help me understand some of the terms so that I can understand how much interest Moneybarn owes me. When the FOS says something like:
“Refund any payments Mr X has made in excess of £4,795, representing the original cash price of the car. It should add 8% simple interest per year* from the date of each overpayment to the date of settlement.”
–Is the interest calculated on each direct debit payment I made to the lender after I paid them a total of £4795?
–Does the ‘date of settlement’ referenced above mean the day the loan was settled (March 2021), or does it mean the day that the lender refunds me and settles our dispute? (Hopefully this month, November 2023)?
Sara (Debt Camel) says
Is the interest calculated on each direct debit payment I made to the lender after I paid them a total of £4795?
That may not be how they calculate it, but it should give about the right answer
Does the ‘date of settlement’ referenced above mean the day the loan was settled (March 2021), or does it mean the day that the lender refunds me and settles our dispute?
the say they calculate the settlement amount. which should be just before they pay you.
Hoe large is the refund?
MM says
I overpaid £5,016.11 in total. I haven’t been given any figure from Moneybarn or FOS yet how much I am due exactly, but I just want to make sure I understand this right in case Moneybarn try to give me less than I’m due.
Sam says
Hi Sara,
I have contacted you previously about my case against Moneybarn and given me some great advice but I thought I would put it on here incase this has happened with anyone else.
I basicallly put in an affordability complaint against Moneybarn that they rejected so I went to the Ombudsman. After a lot of backward and forward emails the investigator has said that they are unable to look into the case as Moneybarn took me to court resulting in an apparent CCJ for me. Now this CCJ never showed up on any credit file including a statutory credit report. The investigator is now closing the case because in his words Moneybarn have proved ‘beyond doubt’( his words) that Moneybarn raised a court judgement against me.
He then goes onto say this
I can’t comment on why the judgement isn’t showing on your credit file however, you may have cause for complaint with Moneybarn if they’ve not recorded the judgement as they’re required to do. Assuming you do raise a new complaint with Moneybarn for failing to report the judgement to the credit reference agencies, Moneybarn will be afforded up to eight weeks to investigate the matter before issuing their final response to you.
I am so angry about this as not only did Moneybarn fail to do proper affordability checks, they didn’t declare my CCJ to the credit agencies leaving me with a CCJ for the last 6 years that I knew nothing about.
I’m just wondering if you have any advice or a letter template I could use before pursuing this with Moneybarn? Is there anything I could go back to the ombudsman with?
Many thanks again
Sara (Debt Camel) says
Have you asked for evidence 0f this CCJ? I am sure Moneybarn did go to court to get a possession order. That is not a CCJ.
Because a lender doesn’t report a CCJ to the credit reference agencies. The courts notify Registry Trust and Registry Trust notifies the CRAs. The adjudicator doesn’t seem to understand this.
I think you said you checked Registry Trust and no CCJ was showing?
Sam says
Thanks Sara,
Yes I went to the Registry Trust and no CCJ was showing. I will go back to the investigator and ask for the evidence of the CCJ. Do you think they are likely to look at the complaint if it is proved it’s a possession order and not a CCJ?
Thanks
Sara (Debt Camel) says
Yes I think they should. A possession order is NOT a money claim – it will never show on your credit record – and you cannot dispute it by saying the debt is unaffordable. And in any case, you paid the arrears and the car was returned.
So you are NOT asking FOS to overrule a court decision – you are not challenging the court decision in any way, you are making an affordability complaint.
Ask for this to go to an Ombudsman if the adjudicator doesn’t change their mind.
Ruth says
Hi Sara,
I’ve just won a complaint at Ombudsman stage against 247Money Group for irresponsible lending on car finance. Could you tell me from this, does the ombudsman mean I’ll receive the interest I paid or the £7870? I’m not 100% sure from the wording…. Thankyou
“As I don’t think 247 should have approved the loan, I don’t think it’s fair for them to charge
any interest or other charges under the agreement. But Miss T had use of the car before she
sold it, and then she benefitted from the proceeds of the sale. To settle Miss T’s complaint,
I’m inclined to say 247 should do the following:
Refund all the payments Miss T has made in excess of £7,870, representing the
original cash price of the car. 247 should add 8% simple interest per year from the
date of each overpayment to the date of settlement.
Remove any adverse information recorded on Miss T’s credit file regarding the
agreement.”
Sara (Debt Camel) says
You will get the interest you paid. That is any deposit you paid PLUS the monthly payments you made PLUS any final settlement figure MINUS the £7870 cost of the car.
MM says
Hi Sara,
I was just wondering, is there any worries you have heard of about Moneybarn’s financial situation? It seems to me that lots of people are now complaining about them which has got me worried if I’ll end up in a similar situation to when Amigo Collapsed – putting lots of claims in jeopardy.
Sara (Debt Camel) says
I don’t think so!
Leanne says
Hello,
I too have finance with 247Money Group, i would like to put forward an affordability complaint. I’m just worried they would request the car back if i make a complaint? Agreement started Sept 2022 for 48 months.
The total amount : £7,834.68
Deposit (cash & part exchange) £99.00
Total amount of credit £5,550.00
Interest £2,185.68.
Sara (Debt Camel) says
how much was the car? how much are you paying each month?
Bee says
Hi Sara, I need some help please. I submitted a complaint in April 2022 to the FOS about the affordability of my car finance from Moneybarn. My car finance was taken out in March 2015 and has been completed. At the time of taking out the finance, my monthly salary was £1,800 per month and my monthly mortgage payment was £995, council tax was £130, and other bills totalled approx £450. I had 3 x ccjs and 2 payday loans on the go, 1 which was severely delinquent (over 3 years delinquent as in no payments made) my monthly Moneybarn payments were £375 per month and I ended up prioritising the car finance above everything else resulting in 3 additional ccjs. My case was finally reviewed by an investigator from FOS in early Oct this year, 18 months after my initial submission to them. The investigator then said he agreed with Moneybarn but asked me to explain my delay in submitting my complaint. I explained that I was unaware that I could submit until being made aware via social media and online articles. He still did not agree with me but said he would forward to an independent ombudsman for consideration. I heard nothing for a few weeks then today he asked for more detail on my complaint but hadn’t confirmed that the FOS would be taking it forward. Is there any advice you can share?
Sara (Debt Camel) says
have you been asked questions about when you knew that Moneybarn were at fault?
Bee says
Hi Sara,
The investigator asked ‘ We can look at a late complaint if exceptional circumstances were responsible for this, so if there’s anything that might’ve stopped you complaining in time and you want me to consider this, please let me know.’ So I explained that I was only aware early last year and had initially felt I was at fault for putting myself in that financial situation. I truly didn’t know they were responsible for ensuring the finance was affordable.
Sara (Debt Camel) says
Then repeat what you have said and that you want this to go to an Ombudsman if the adjudicator doesn’t change their mind.
Bee says
Thanks Sara, I will do so.
Bee says
Hi Sara, do the investigator has come back to me and said that he my complaint is outside the 6 year time limit. He has agreed to forward on to an Ombudsman at my request. He also said that given my awareness of my ccjs, delinquent debt and poor financial situation, I was aware that the finance was unaffordable. I responded that even given all that, Moneybarn clearly didn’t do sufficient checks in their financial duty of care to me as a consumer and gave me a loan that was clearly unaffordable. He also mentioned that he was having to check his decision making with a superior as he was new to car finance affordability complaints. I am now waiting for the ombudsman to look into my affordability complaint. Do you have any additional advice?
Sara (Debt Camel) says
I think you could add that the fact you knew your finances were bad with CCJs and payday loans but this didn’t prevent you from needing a car – without a car you couldn’t manage [to get to work?]. You did your best to pay Moneybarn even though that meant defaulting on other debts but at the time you thought this was you fault not Moneybarn’s. You had no idea that Moneybarn should have made checks on affordability, as it would have been plain to anyone that you would struggle to pay them .
MM says
Just a heads up Bee, I also earlier this year submitted a complaint about Moneybarn lending to me in Feb 2016. They kept asking me these questions, but I told them that I only found out last year that I was able to complain. Once they understood this, they took it forward, but very slowly.
About a month ago i got told FOS thought it was unfair, and then moneybarn expected the comlpaint and I’m expecting a settlement for 5.5-6.5k. So as long as they understand you only knew you were able to complain recently – this should not be a problem. As Sara said, if they disagree take to the Ombudsman.
Bee says
That’s really encouraging to hear. Thank you MM. I’m really glad your case worked out.
John says
Hi can anyone offer advice or experiences. The adjudicator agreed with me that blue motor finance acted irresponsibly. They then agreed with this but queried how the settlement was addressed so fos reworked it and they have to refund what I paid over the cash price. They have another week to agree to this. My question is can they go back on originally agreeing it was irresponsible? Also if they agree at the adjudicator level? How long would I have to wait for the refund ? Does anyone have any similar experiences ?
Frank says
Hi Sara I’ve submitted a claim for a current car finance I have as it was unaffordable to me at the time, it’s put strain on my financial situation ever since. Looking at the income and expenditure I gave them it’s not accurate and it gave a higher disposable income than I actually had. They didn’t verify what I told them with payslips or bank statements and I also had nearly 20 unpaid defaults on my credit file. Will it go against me with the FOC that the income and expenditure details I gave on the application weren’t accurate? Thank you
Sara (Debt Camel) says
Is this car essential for you? How much did you borrow, not including interest, and how much have you paid so far?
Franki says
Yes the car is essential for me as it’s for work I borrowed £13,500 and have paid back £12,245 so far
Sara (Debt Camel) says
ok so you are close-ish to the point of having repaid it all. I hope you are continuing to make payments.
there is nothing laid out about what verification has to be done, but if your credit record was bad and with recent problems, then as this was a large loan they should have verified your income and enough of your expenditure to make a reasonable assessment of affordability
Franki says
Thanks Sara will let you know the outcome once it’s all finished fingers crossed and yes il continue to make the payments