Trust declines as UK car owners navigate PCP financing scandal
March 8th, 2024, Agnieszka Hoffmann

Trust declines as UK car owners navigate PCP financing scandal

The Financial Conduct Authority (FCA) initiated an investigation in January 2024 into potential mis-selling of finance packages to UK car buyers who made their purchase before January 28, 2021. The probe revealed that lenders encouraged brokers and car dealers to apply higher interest rates, in order to inflate commissions. Consequently, those opting for vehicle financing options, like Personal Contract Purchase (PCP) or Hire Purchase (HP), collectively overpaid by £300 million annually.

New data from YouGov reveals consumer awareness of the scandal and expectations of redress.

How many car owners might be affected by the PCP and HP scandal?

YouGov surveyed 4,279 adults in the UK to assess the impact on those who purchased cars through PCP or HP, the amounts they paid, the number of those filing complaints (and those considering it), and how the growing storm has influenced their opinions about banks and car dealerships in general.

Our data reveals that 71% of adults owned a vehicle before 2021. And while many of these paid cash or took out a non-specialist loan for their car purchase, a quarter (25%) purchased a vehicle through PCP or HP, a proportion that represents nearly 10 million adults in the UK.

How much were people paying under their PCP and HP deals?

Payments under these schemes differ according to individual agreements so we dug into what who was paying what.

The most widely chosen payment band was between £200 and £299 - around 36% found themselves paying within this range - with more than a third making payments for around three to four years (36%). That equates to a potential £14,000 dent in the household budget for these car-buyers. Another three in ten consumers (31%) made payments for two to three years.

How wide is awareness of mis-selling of HP and PCP?

Awareness of the scandal among car owners in general currently stands at 46%. Among those who have financed a car purchase with HPI or PCP, that number is higher still – nearly three in six (59%) of this group are already of the FCA’s investigation – and that’s before redress schemes have been finalised. So how did they find out?

Money Saving Expert Martin Lewis has been the main driver of awareness so far. Nearly two in five heard about the scandal through his ITV consumer show, The Martin Lewis Money Show. Other TV (33%) and social media (20%) have been the other main drivers of publicity.

Traditional media like newspapers, contributed to the awareness of 19% of respondents. Auditory channels like radio and podcasts accounted for 15% of awareness, while personal networks remained influential, with word-of-mouth contributing to the awareness of 9% of respondents.

What proportion of car-owners have already filed a PCP or HP mis-selling complaint?

Given that this latest financial scandal is fairly new out of the blocks, with news breaking only in mid-January, and schemes yet in place to make redress, you might be forgiven for thinking that borrowers may be taking a wait-and-see approach. Yet roughly one in ten car owners (9%) who have used PCP or HP financing options - equating to one million adults - have already filed a complaint, while an additional 3 million (30%) are contemplating doing so, and around a quarter may do so but remain undecided (27%).

But borrowers are not necessarily optimistic about the outcome of any complaint. Around half of UK adults who utilised PCP or HP financing options (51%) express concern about the perceived difficulty and lengthiness of any claims process, reflecting that people are worried about the resolution procedures which will be put in place.

But not all faith in scheme is lost - a quarter (26%) would still use the PCP or HP scheme to purchase their next vehicle perhaps partly because of the recent legal changes which don’t allow for the selling of non-competitive interest rate loans.

More than a fifth of respondents (23%) express declining trust in financial institutions due to their involvement in PCP and HP matters. Only around 15% attribute more blame to car manufacturers than banks for the associated issues, emphasising the significant expectation of responsibility placed on financial institutions. While 15% are worried they won’t get any owed money back, 14% believe that they are due thousands due to the PCP and HP scandal.

How is the PCP and HP mis-selling scandal affecting brands?

At the height of the PPI mis-selling crisis, banks came in for almost daily criticism from stakeholders. But are finance brands suffering as a result of this latest investigation? Early indications from YouGov BrandIndex (YouGov Daily Brand Tracker) indicates that mud may well be beginning to stick.

This is just the beginning of this story and YouGov will be monitoring the situation as it evolves in the coming months.

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Methodology: YouGov Surveys: Serviced provides quick survey results from nationally representative or targeted audiences in multiple markets. This study was conducted online on February 22-26, 2024, with a nationally representative sample of 4,279 adults in the United Kingdom (aged 18+ years), using a questionnaire designed by YouGov. Data figures have been weighted by age, gender, education and region to be representative of all adults. Learn more about YouGov Surveys: Serviced.

Image: Getty Images