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.
Other sorts of car finance claims
€ar finance commission – cases won at the Ombudsman
In January 2024, 2 major cases were won at the Financial Ombudsman were people had been charged to high an interest rate on car finance in order to increase the commission the car dealer got.
See Car finance commission scandal – can you get a refund? for details and how to start a claim.
But if you think you may have a good affordability complaint it’s probably worth trying that first, as in an affordability complaint you get all the interest refunded, but in a commission complaint you would only get some of the interest back.
“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.
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.
J says
Hi I’m not sure if I have a claim against oodle or not. I took a loan out for £18k with them they have charged £17k ish in interest. I still have £24k to pay off and my car is only worth £10/11k. I had bad credit from being in a financially, and emotionally abusive relationship where my partner used me and left me having to sell my home and in debt
Sara (Debt Camel) says
It’s outrageous interest but that isn’t quite the same as being unaffordable.
When you took The finance out, could you mange To make the repayments and also be able to pay your other debts, bills and living expenses without being left short or borrowing more?
Do you still have this finance?
J says
Hi still have the finance.
Yes I had a number of debts unpaid debts.
I have made a complaint and they are asking for copies of police reports and medical records
Sara (Debt Camel) says
Do you need to keep the car? Because it doesn’t sound as though you have repaid the amount you borrowed so far, in which case the car may be repossessed if you win the complaint.
J says
No, I don’t need to keep it. Although I do need a car.
All I’m really after is for the interest to be lowered to a more reasonable amount. The car is only worth half of what paid for it so with interest I’m -14k in neg eq!
Sara (Debt Camel) says
Well see how this goes. But reducing the rate of interest to a more reasonable level is not one of the approaches the Ombudsman normally adopts.
J says
I’d be happy to let the car go in that case. Do you think it is worth a complaint and failing any co-op from Oodle, the FO? Thanks
Sara (Debt Camel) says
What other option do you have? This seems like your best way forward from what you have said. but I would expect this to have to go to the ombudsman.
R says
Hi Sara.
I put an un affordability claim in with blue motor finance and they have responded via email asking me for bank statements prior to the sale of the finance which was 2019 so they can conclude the complaint. Does this sound promising or is this a generic type thing they have to do. Shouldn’t they have asked for bank statements at the time of my application rather than now putting a complaint in? My bank statements show exactly what i wrote in the original complaint ie several creditors and gambling. Are they asking for the bank statements to agree with me or for what reason are they doing this at this stage?
Many thanks in advance.
Sara (Debt Camel) says
I suggest you send Them – they prove how unaffordable the finance was also. Also they will be needed if you go to the Ombudsman. You can get statements even from closed accounts
R says
I have sent them and ive also called them for an update to which they said they are reviewing the evidence. Does it sound likely i will win this case directly with them giving my bank statements show it was unaffordable (i was living in an overdraft for many years)
Sara (Debt Camel) says
They mY just ask everyone.
HX says
Hi Sara – my husband took out PCP finance for a car in Dec 2018. He put down (or rather on a credit card) £2k deposit and the capital amount was £12.9k (total repayable £16.9k). The monthly repayment was £204/month. By July 2020, he p/x the car for another car (which we also put in an affordability complaint with that lender).
The FOS has upheld the complaint and has said:
As I don’t think CA Auto ought to have approved the lending, I don’t think it’s fair for it to be able to charge any interest or charges under the agreement. Mr X should therefore only have to pay the original cash price of the car, being £14,9K (which includes the warranty sold). Anything Mr X has paid in excess of that amount should be refunded as an overpayment.
To settle the complaint CA Auto should do the following:
• Refund any payments Mr X has made in excess of £14,K, 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.
• Remove any adverse information recorded on his credit file regarding the agreement.
Do you know how the refund will be calculated what is it likely to be?
Thanks Sara!
Sara (Debt Camel) says
How many monthly repayments did he make?
What was the p/x amount paid to settle the PCP?
HX says
Hi Sara – I think it could be 17 payments made (+/- 1 or 2 months). The p/x settlement figure was £8641. Looking at it now, I’m not sure it wasn’t HP vs PCP.
Sara (Debt Camel) says
You should be able to tell from your bank statements how many payments you made.
Assuming it was 17, then you paid in total 2000 (the deposit) + 3468 (17 lots of 204) + 8641 (px) = 14109. That is only 109 more than 14k. And its less than 14.9k I suggest you double check the numbers as on that you will get little or nothing back.
HX says
Thanks Sara.
I read off the adjudicators comments, she has the start date wrong. It was 28 months paid in total so by my calcs: (£5712 + 2000 + 8641) – 14900 (plus 8%, however that is calculated)
Sara (Debt Camel) says
ok that makes more sense. the refund will 8% per year from July 2020 so about 32% extra
J says
Thank you- do you think I would have a good chance with the ombudsman? I know we can’t say for sure I’m just wondering if it is worth it
Sara (Debt Camel) says
At the point you took the finance you had bad credit and unpaid debts. Oodle should have checked closely to make sure it would be affordable for you. This complaint is well worth sending to the Ombudsman if Oodle reject it.
Steve says
I also currently have a complaint in with the ombudsman against Oodle and my experience so far is the investigator is absolutely useless. They have ignored alot of my essential credit commitments despite being given the proof multiple times. I gave clear calculations of my income and outgoings to make it easier for them and it still wasn’t looked at properly
In my opinion they are too busy to look at cases properly before making decisions and seem to decide in favour of Oodle by default
If you look at all the previous decisions made by the ombudsman for complaints against Oodle, for some reason they seem massively biased and are not acting impartial when it comes to Oodle at all…..Very strange
Sara (Debt Camel) says
looking at published ombudsman decisions gives an odd view as you don’t see the majority that settle at the investigator level.
Jan says
My other half is having similar issues with regards to Oodle, the adjudicator originally sided with Oodle and asked if he wanted it to go to an ombudsman for final decision, he said yes and she asked one question about them having agreed the finance the day before they conducted the credit check, he provided more clarity on this along with evidence, a few weeks later she came back and said her decision was the same, he pointed out this was just one of many points of his complaint and that he thought she was sending to the ombudsman, a few weeks passed again and she’s confirmed she’s passed it on.
J says
First fill me with much confidence!
I’ve had final response from Oodle and they too have ignored my concerns. They seem to think that £17k in interest is the norm!