Peugeot, the French brand of automobiles is commonly purchased in the UK, using a PCP finance agreement. After an investigation by the FCA, it was found that salespeople in car dealerships may have been improperly inflating the costs of finance agreements in order to earn higher commissions from their lending partners.
A PCP is a personal contract hire. Similar to traditional hire purchases, personal contract purchase (PCP) is a type of vehicle financing for individuals. A PCP is designed so that the customer pays a lower monthly amount over the contract period (typically between 24 and 48 months), leaving a final balloon payment to be made at the conclusion of the agreement.
What is the issue with buying a Peugeot on a PCP finance agreement?
Government-backed City watchdog, the Financial Conduct Authority (FCA) has prohibited the tactic that dealership sales teams may have been using. In this practice, commissions were increased when their customers agreed to more expensive PCP finance agreements when buying the vehicle. Customers were overpaying due to this secret or ‘hidden’ commission.
Because customers may not have been told about the amounts of commission paid to the salespeople, this may have in effect increased the cost of the car and monthly repayments. This is known as a ‘secret’ or ‘hidden commission’. Hidden commissions are a form of financial mis-selling.
Customers who were subject to this practice may be eligible to claim a refund for these fees, together with any interest paid.
