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Cars and garages

Everything you need to know about financing your car purchase

Different ways of financing your car purchase and complaining about it!

Rob Sams is a contributor to Legal Beagles, a forum for people who require assistance or an understanding of their legal rights. He particularly answers questions on the Consumer Rights Act as well as queries on voluntary termination rights under car finance agreements. He has kindly agreed to produce this post on different ways of financing a car and what to do if it all goes wrong!

Road full of cars black and white

Financing your car

Over the last few years, reports have shown that a large proportion of cars are mainly financed as opposed to buying outright.  With a number of finance options available depending on the buyer’s needs, this article provides a short explanation of the various finance deals as well as your rights if something goes wrong.

What options are available for financing your car purchase?

Hire Purchase: a HP agreement is a type of agreement which the car is hired to you over a fixed period of time. At the end of that fixed period you have the option to purchase the car (though you are not under an obligation to do so) or return it back to the lender.

Conditional sale: a conditional sale is almost identical to a hire purchase agreement except for one difference. under a hire purchase, you have the option to purchase the car at the end of the agreement whereas a conditional sale obliges you to purchase the car and make the final payment.

Personal contract purchase (PCP): similar to conditional sale and hire purchase agreements,  PCP agreements tend to have lower monthly instalments because they only cover the depreciation over the term of the agreement, leaving a much larger balloon payment at the end.  PCP agreements are becoming increasingly popular with consumers.

Personal Contract Hire (PCH): a PCH agreement is essentially a hire agreement over a long period of time, returning it at the end of the agreed term.  One thing to note is that there are strict limits on the mileage you can do, and if you go over, you may get stung. Be sure you estimate your annual mileage correctly but as a guide, the average number of miles is around 10-12k per year.

Fixed Sum Loan: Fixed sum loan agreements are simply personal loans that you would usually obtain from your bank however the loan can only be used for the purchase of the car.  Ownership of the car will immediately pass to you on entering into the agreement and you repay the monthly instalments in accordance with the terms.  Some finance companies such as Santander and FCA Automotive Services (a subsidiary of Fiat who offer loans) offer fixed sum loan of agreements.

How to complain if there is a problem with your financed car

Contrary to popular belief, whenever something is wrong with your car, it is not the responsibility of the dealership but the lender because there are two transactions that take place.  First, the lender will purchase the car from the dealership and second, the lender will then enter into an agreement with you to hire or purchase the car.  Whilst it may seem practical to approach the dealership first, they are not under any obligation to repair the car on your request, though there is no harm in speaking to the dealer first.

If you notice a fault, defect or the car was not described then you may have certain rights against the lender under the Consumer Rights Act 2015 (CRA).

The lender must ensure that the car is of:
Satisfactory quality: the lender is obliged to make sure that the car is in a roadworthy condition at the time of entering into the agreement and is
Fit for purpose: If you made it known to the dealer that you wanted to use the car for a specific purpose or that it must be able to do specific things, and the dealer confirms that it is suitable for those needs, but subsequently turns out to be false, the car would not be fit for its intended purpose.

Wherever possible it is always best to get things in writing so that you create a paper trail of what has been discussed in the event you need to escalate the matter.  It may also be helpful to bring another person with you who can back up your story at a later date.

How to complain to your finance lender about your car

If you haven’t been able to resolve the matter informally, then your next step is to write a formal complaint to the lender, setting out the problems you have experienced, why it is still not resolved and what needs to be done to resolve the issue.  There are several options you have under the CRA:

Short term rejection: If the car is faulty within the first 30 days then you have the right to reject the car and immediately terminate the agreement, although you need to prove that the fault existed on the first day.  This can be done by obtaining an independent report confirming the faults.  Where you exercise the short-term rejection, the agreement is terminated and you are entitled to the total sums paid to date.

Repair or replace: You may choose the option of having the car repaired or replaced, but if one is disproportionate to the other then the lender can opt for the alternative.  The lender must repair or replace within a reasonable time without causing significant inconvenience as well as covering any costs incurred.

Final right to reject: This remedy is only available after 30 days if the repair or replacement fails to resolve the issue or it was not carried out within a reasonable time.  The difference between this option and the short-term rejection is that the lender can deduct a sum of costs for usage where the final right to reject is exercised.  An alternative remedy is to keep the car but require a price reduction either by future payments or a proportionate refund of what has been paid already.

Complaining to the Financial Ombudsman about your finance lender

Most complaints tend to be resolved with lenders without any further action.  However, if it is still not resolved, then you can bring the matter to the Financial Ombudsman Service (FOS).  The FOS will investigate your complaint and review the evidence from both sides, taking into account any relevant law but also what is fair and reasonable (they are not obliged to follow the law).  Once the adjudicator has reviewed all evidence, they will contact you with an initial decision and explain their reasons.

If you do not agree with initial decision, you can ask an Ombudsman to review the matter and provide a final decision.  If the Ombudsman does not find in favour of you, the decision is not legally binding and you do not have to accept it (you could take further action by bringing legal proceedings in the Small Claims Court).  However, if you accept their decision then it becomes legally binding on both parties and there is no further recourse.

Other rights: voluntary termination

Another common right for consumers who enter into car finance agreements is voluntary termination.  If you have a HP, PCP or Conditional Sale Agreement and you are struggling to keep up with the repayments, the Consumer Credit Act 1974 allows you to terminate the agreement which limits your liability to 50% of the total amount payable.  It goes without saying that, before entering into an agreement you should always make sure you can afford the monthly repayments.  Provided you have taken reasonable care of the goods and paid any overdue instalments then you will have nothing more to pay.

You do not necessarily need to have paid 50% of the total amount payable as you can terminate at any time by giving notice in writing.  However, if you have underpaid, the lender is entitled to the remaining balance which makes up the 50% and this option is not available where the lender has terminated the agreement first.  You should note however, that once you have given notice to terminate the agreement, the notice cannot be revoked.

More on Voluntary Termination

More help and advice on car purchasing and using garages

Car buyers alert: how not to get fobbed off

How not to get fobbed off by a garage (and what to do if you have been!)

All you need to know about car purchasing, financing and garages

How to complain about financial institutions

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Rail delay compensation – Light at the end of the tunnel?

The Southern Railways debacle has caused misery to its many passengers. But whilst passengers are entitled to refunds for tickets purchased and not used, or for services delayed due to a rail company’s fault, are they missing out on compensation for delays as well as other issues?

All rail companies are signed up to National Conditions of Travel which states that the amount of compensation offered by train companies in their Passenger’s Charter varies between them. However, as a minimum, if you arrive more than 60 minutes late at your destination station you will be entitled to compensation.

Currently passengers can claim if they have been delayed for 30 minutes or longer. The first passengers able to use the Delay Repay 15 were those on Southern Rail, owned by Govia Thameslink Rail, from 11 December 2016. It is to be rolled out to the rest of GTR’s services before being extended across the country.

Are we complaining and gaining redress when we should?
In 2013 Transport Focus found that almost nine in 10 of passengers eligible for compensation for delays, did not claim. In 2016 it spoke to over 7000 passengers and found that the number claiming compensation has increased to 35 per cent in 2016. The research shows how few people are claiming what they are owed.

Helen Dewdney, The Complaining Cow consumer champion and author of How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results! concurs, saying that so few people know their rights even though rail companies should be doing as much as possible to inform passengers that they can claim. If so few people claim for a basic entitlement then it is little wonder that they don’t claim in other circumstances. She says that a strict interpretation of the Consumer Rights Act 2015 (Rail companies were covered from 1 October 2016) could mean that customers could claim for higher percentages of the ticket price than companies currently offer and also for shorter delays.

Furthermore, under this Act, services must be carried out with reasonable skill and care and she encourages customers to claim for redress to which they are entitled and looks forward to the first case to be heard in the Small Claims Court! “It is still the large majority of people who don’t claim for delays never mind poor service”, she says, “We have yet to really see whether consumers will really start challenging companies and if they in turn will hold out on compensating travellers if, for example, they do not have accessible toilets in working order or they are having to stand when a company has put on fewer carriages than normal”.

What do the rail companies say?
When given examples of possible claims, a spokesperson for Southern Railways said “We would investigate any claim brought under the Consumer Rights Act thoroughly and take any action as necessary”

A Virgin Trains spokesperson said: “We are fully compliant with the requirements of the Consumer Rights Act.”

A spokesperson for Scotrail said “We judge each complaint on its merits.  For example, if someone was complaining about lack of carriages, we would need to consider if the train had fewer carriages that normal, or whether it ran with the booked or maximum number of coaches permitted on that route. We also consider whether there was advertised special events taking place, and whether we had advised customers in advance that trains were likely to be busier”.

GWR said “Liability under CRA legislation depends on the train operator not exercising “reasonable care and skill” in providing a service/product (section 49), and therefore only covers issues that are under our control. However, we always aim to reasonably consider (and regularly pay) compensation and refund requests where we may not be strictly liable in law. For example, (and something we offered before the CRA came into effect) if you have reserved a seat (which is free) and we are unable to provide one.

What do customers say?
Travellers are taking to social media to voice their concerns:

There are claims that companies are misleading customers

https://twitter.com/robster38/status/819985397304459264

Delay on Delay Repay?
An investigation by BBC Radio 4 You and Yours found that many people are experiencing delays in receiving their payments. Transpennine Express told the programme that their delays are due to a high volume of correspondence and that they’re working on the problem. Northern Rail apologised for the backlog and said they were working to understand and resolve the issues. Arriva Trains Wales said that they’ve recruited extra staff to help deal with the backlog – which they say was due to an increase in compensation requests in December 2016.

What do you need to know if you want to complain?
Dewdney offers this advice for those wanting to complain:

  1. From 1 October 2016 rail is covered by the Consumer Rights Act 2015, which gives you more rights few know about.
  2. Passengers are entitled to have their compensation paid within 14 days, issued by the same method the passenger used to pay for the ticket.
  3. Keep your tickets as evidence and take a copy if you have to post them.
  4. Make a note of your journey: Date, time, where travelling from/to and how long you’ve been delayed at the time before you forget!
  5. Make a note of the reason given for the delay.
  6. Check how long you have to claim, it is usually up to 28 days.
  7. Passengers can claim for any length of delay. If you suffer repeated delays of less than half an hour or overcrowding due to an unexpected lack of carriages, you might get money back if you take your case to court. Currently, no compensation is offered.
  8. Where a service has not been provided with reasonable skill and care, passengers will now have a right to a refund of up to the full ticket price.
  9. Put your complaint (unless web based delay/cancellation refund) in writing so that you have a record.
  10. You don’t need a third party company to claim for you, just like claiming for delayed airline flights. Instead, do it yourself and get 100% of the refund.
  11. If the issue was within the company’s control, be objective, succinct and clear in outlining the issue that occurred.
  12. Make it clear what you want to happen and what you will do if you are not satisfied with the response (e.g. take it further through Transport Focus [2] or if inside London, London Travel Watch  or Small Claims Court.
  13. If not satisfied with the response, write to the CEO using contact details from the CEOemail.com website. The matter will then be escalated and taken seriously.
  14. It may also be possible to claim from your credit card company under Section 75 of the Consumer Credit Act for non delivery of services.

Email addresses for CEOs of UK railway companies with links to Delay Repay where applicable.

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