Watchdog calls for freeze on UK PCP and PCH car finance repayments

Financial Conduct Authority recommends three-month PCP and PCH payment freeze for “customers who are having temporary difficulties” due to coronavirus

Car finance lenders should provide a three-month payment freeze to motorists experiencing difficulties meeting their monthly PCP and leasing repayments due to coronavirus-related issues, the UK’s financial watchdog has said.

The Financial Conduct Authority (FCA) warns that automotive finance houses “should not take steps to end the agreement or repossess the vehicle” if customers are having difficulties making monthly payments due to reduced incomes, unemployment, or health issues brought about by coronavirus.

The FCA also warns finance companies against changing contracts “in a way that is unfair”, such as readjusting monthly repayments for PCP (personal contract purchase) deals based on falling used car values. With PCP deals based around a car’s projected depreciation over the length of the deal, and used-car values falling as sales are significantly reduced during the COVID-19 pandemic, the expected value of cars that are subject to a PCP deal could fall significantly, with the FCA warning monthly repayments should not be adjusted to reflect this.

More recommendations concern customers at or near the end of their PCP deals. People in this situation would normally be offered three options: make the final ‘balloon’ repayment and own the vehicle outright; walk away from the deal owing nothing; or use any overpayments accrued as a result of the car depreciating less than predicted (often referred to as ‘equity’) to go towards the deposit on a new car, and a new PCP deal. 

This third option, of rolling equity into a new deal, is by far the most popular one for those taking out a PCP deal (who make up the majority of new-car buyers), but with dealerships up and down the country forced to close, this is difficult, if not impossible. 

The FCA has previously told drivers whose contracts are about to come to an end to contact their lenders and discuss what they would like to do, and is now advising finance houses: “Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.”

Do you think this is a good idea? Let us know your thoughts in the comments below...

Recommended

Driving test bookings: huge waiting lists play into the hands of fraudsters
News

Driving test bookings: huge waiting lists play into the hands of fraudsters

Crooks and chancers are making a packet out of the failing UK driving test system, and its learner drivers who are paying the price
7 Sep 2023
New car delivery times 2023: how long will you have to wait?
New car waiting times
Features

New car delivery times 2023: how long will you have to wait?

No one likes having to wait for their new car so we called key manufacturers to get their latest UK lead times
12 Jun 2023
London Congestion Charge: 20-year anniversary, map, times, exemptions and full details
Congestion Charge
Tips & advice

London Congestion Charge: 20-year anniversary, map, times, exemptions and full details

The UK’s first congestion charge has been in place for 20 years. Has it been a Success or failure? The debate rages on...
17 Feb 2023

Most Popular

‘Forget leasing a car, a cut-price van should be your next everyday vehicle’
Opinion - Fiat Scudo
Opinion

‘Forget leasing a car, a cut-price van should be your next everyday vehicle’

With some huge savings to be had, Mike Rutherford thinks a van could be the perfect vehicle
3 Dec 2023
New Renault 5: price, specs, launch and on sale dates
Renault 5 EV concept at 2022 Goodwood Festival of Speed
News

New Renault 5: price, specs, launch and on sale dates

Renault’s reborn Renault 5 will start from €25,000 in Europe, suggesting a circa-£30k price in the UK. It's due on sale in the summer of 2024. Here's …
1 Dec 2023
Deal of the Day: Spacious Skoda Superb is a peerless estate for £223 a month
Skoda Superb Estate - front tracking
News

Deal of the Day: Spacious Skoda Superb is a peerless estate for £223 a month

The Superb is one of our favourite estates and our Deal of the Day for Monday 4 December
4 Dec 2023