Is the finance company jointly responsible when the car was bought through HP or PCP?

Quick answer

Yes. If you purchased a car using Hire Purchase (HP) or Personal Contract Purchase (PCP), the finance company is legally responsible alongside the dealership if the vehicle is faulty, misdescribed, or unfit for purpose. Under the Consumer Rights Act 2015, the finance provider is considered the legal supplier because they own the vehicle until the final payment is made. This means you can pursue them directly for a repair, replacement, or refund, which is particularly valuable if the original dealer becomes uncooperative or ceases trading.

Why the finance company is liable under HP and PCP

When you buy a car with cash or a personal loan from your bank, your contract for the vehicle is solely with the dealership. If something goes wrong, your dispute is strictly with the seller.

HP and PCP agreements work differently. The finance company pays the dealer upfront and retains legal ownership of the car throughout the term of the agreement. Because they are the legal owner supplying the goods to you, they carry statutory liability under the Consumer Rights Act 2015. The dealership effectively acts as their agent.

This structure gives you a powerful safety net. You do not need to rely on Section 75 of the Consumer Credit Act 1974 (which typically covers credit card purchases between £100 and £30,000). Your protection under HP and PCP is inherent to the finance contract itself, regardless of the car's price.

What faults are covered?

Finance company liability for faulty cars applies when the vehicle breaches the core standards set by UK consumer law at the time it was handed over:

• Satisfactory quality: The car should meet the standard a reasonable person would expect, considering its age, mileage, and price. A five-year-old motor with 60,000 miles will naturally show more wear than a nearly-new model, but it must still be reliable and safe.
• Fit for purpose: If you specifically told the dealer you needed a car capable of towing a caravan or suitable for a new driver, and the supplied vehicle cannot safely do this, it is not fit for purpose.
• As described: The vehicle must match the advert, the specification sheet, and any verbal promises made by the salesperson before you signed the finance agreement.

Your rights timeline

How you approach the finance company depends on how long you have had the vehicle:

• First 30 days: You have a short-term right to reject the car for a full refund if a fault is discovered. The finance agreement can be rescinded, and you should not be charged for usage.
• 30 days to 6 months: You must give the finance provider (or their appointed dealer) one opportunity to repair or replace the vehicle. If the repair fails or the fault returns, you can reject the car for a refund, though a fair deduction may be made for the mileage and time you have used it. Crucially, any fault that appears within six months is legally presumed to have been present at purchase unless the finance company can prove otherwise.
• After 6 months: You can still claim, but the burden of proof shifts to you. You will need independent evidence, such as a mechanic's report, to show the fault was inherent and not caused by normal wear and tear or your own driving.

Step-by-step: How to pursue a claim

If your HP or PCP car develops a fault, follow this sequence to protect your position and ensure the finance company takes your complaint seriously.

1. Stop using the car if it is unsafe. Do not continue driving a vehicle with serious mechanical or safety defects. Keep it stored safely and document the issue immediately.
2. Notify the dealer and the finance company. Contact the supplying dealership first, as they will usually handle the initial inspection. However, copy the finance provider into all emails from day one. This establishes a formal paper trail with the legally liable party.
3. Submit a formal complaint to the finance provider. If the dealer dismisses your concerns, drags their feet, or offers an inadequate fix, escalate directly to the finance company's complaints department. Use their official online form or registered post. State clearly that you are raising a formal complaint under the Consumer Rights Act 2015 regarding goods supplied on finance.
4. Provide your evidence pack. Attach photos, videos of the fault, copies of the original advert, your finance agreement, and any independent garage assessments. The more organised your evidence, the harder it is for them to delay.
5. Wait for the final response. The finance company has up to eight weeks to investigate and issue a final response letter. They may offer to pay for repairs at an approved garage, propose a partial refund, or in serious cases, agree to unwind the finance agreement entirely.
6. Escalate to the Financial Ombudsman Service. If the finance company rejects your claim, offers an unsatisfactory settlement, or fails to respond within eight weeks, you can take your case to the Financial Ombudsman Service (FOS). The FOS is free for consumers and can order the lender to pay compensation, cover repair costs, or cancel the finance contract. Their decision is binding on the finance company.

What happens if the dealer has gone bust?

This is one of the main advantages of using regulated car finance. If the original dealership enters administration or disappears, your rights do not vanish. Because your contract is with the finance house, they remain fully liable for the condition of the car they supplied. You simply direct your entire complaint to them, and they must arrange and fund any necessary remedies.

When browsing for your next vehicle on Gumtree motors, always verify whether the seller is arranging finance directly or if you are being directed to a third-party lender. Knowing exactly who holds the paper trail before you sign makes enforcing these rights much simpler later on.

Checklist: Preparing your complaint

Before contacting your lender, ensure you have the following ready. Finance providers operate on documentation; verbal phone calls rarely move a case forward.

• [ ] Finance agreement reference number: Have your account details to hand.
• [ ] Original advert and spec sheet: Screenshots or PDFs showing how the car was described, including mileage, service history claims, and condition grades.
• [ ] Timeline of events: A concise, dated list of when you collected the car, when the fault first appeared, and every interaction with the dealer.
• [ ] Visual evidence: Clear photos or video clips demonstrating the fault. For intermittent issues, a dated video is often the only way to prove it exists.
• [ ] Independent assessment: If the car is older than six months, a written report from a qualified mechanic or the RAC/AA stating the likely cause and whether it points to a pre-existing defect.
• [ ] Repair quotes or invoices: If you had to pay for emergency repairs to make the car safe, keep all receipts. Do not authorise major work without the finance company's written approval, or you may struggle to reclaim the costs.

FAQ

Does this liability apply if I used a personal loan or credit card?

If you used an unsecured personal loan from your bank, your contract is only with the car dealer, so the bank is not liable for faults. If you paid using a credit card (even just for the deposit), Section 75 of the Consumer Credit Act may make the card issuer jointly liable for purchases between £100 and £30,000. HP and PCP agreements offer broader protection because the lender is the legal supplier regardless of the vehicle price.

Can I claim for faults on a PCP car if I plan to hand it back?

Yes. If you intend to return the car at the end of the PCP term, you are still entitled to a vehicle that was of satisfactory quality when supplied. However, if the fault is purely fair wear and tear relative to the car's age and mileage, the finance company will not be liable. Keep up with scheduled servicing, as missing stamps in the service book can void your ability to claim for mechanical failures.

Is there a time limit for making a claim against the finance company?

In England, Wales, and Northern Ireland, you generally have up to six years from the date the car was supplied to bring a claim (five years in Scotland, starting from when you discovered the problem). However, practical success drops significantly after the first six months because you must prove the fault was inherent rather than caused by age or usage. Act as soon as a problem arises.