How Car Finance Companies Fail Consumers

Here’s a breakdown of the ways some car finance companies fail consumers—and how you can protect yourself. When it comes to buying a car, car finance is a popular choice for many people. It spreads out the cost, making it more manageable. However, not all car finance deals are as good as they seem. Unfortunately, some car finance companies use tactics that can take advantage of consumers. Before purchasing the car read sales purchase agreements from seller and finance company understand clearly warranty procedures so as the cost for returning the vehicle if rejecting. Usual parties involved in chain car dealer, finance broker, and the finance company. Advised do not use finance brokers to minimise inconvenience down the line always deal with main finance company.

Car finance companies often use contractual loopholes and legal interpretations to avoid paying for car repairs, particularly by relying on terms outlined in the Sales of Goods Act 1979 (as amended) and specific agreements between the car seller and the finance company. Warning – The fact that car might need repairs or part replacements doesn’t automatically classify the vehicle as being of unsatisfactory quality, granting you the right to a repair or return. Here’s how this happens:

1. Interpreting the Sales Contract: Finance Company vs. Car Seller

Under typical car finance agreements, the finance company owns the car until all payments have been made. The finance company purchases the vehicle from the dealer or seller and leases it to the buyer (you). Because of this arrangement, the finance company often interprets their contractual obligation as one between them and the car seller, not necessarily involving the consumer directly.

This interpretation allows the finance company to distance itself from repair obligations, particularly in cases where the vehicle develops issues after purchase in first 6 moths. They may argue that any complaints or faults should be directed at the seller, who provided the car, rather than the finance company. For all consumers – finance company is liable for repairs even fault wasn’t present at the time of the purchase applies within 6 months if finance company are unable to persuade seller to repair the vehicle.

2. Avoiding Repairs Under the Sales of Goods Act

The Sales of Goods Act 1979 requires goods (including cars) to be of satisfactory quality, which includes being fit for purpose, free from defects, and durable. However, finance companies sometimes use a narrow interpretation of this act. They may argue that the issue falls under “wear and tear” rather than being an inherent fault, which they claim they are not responsible for fixing.

When a fault is labeled as “wear and tear,” the finance company may:

• Deny liability for repairs, stating that the defect was part of the normal aging process of the car.
• Argue that under the sales contract with the dealer, they are not responsible for covering non-inherent defects (those that arise due to everyday use, such as brake pads or tires wearing down).
• Wear and tear definition its considered in automotive industry as all consumable parts, maintenance parts based on annual servicing requirements, all friction materials related only to brakes and clutch plates, tyres and exhaust, suspension, shock absorbers and wheel bearings are usually classified as wear and tear parts. Anything related to engine and gearbox, differential or powertrain and associated electrical management systems to those item is not classified as wear and tear parts by nature. Otherwise you can wash everything under the wear and tear as everything you use is wear and tear.

3. Ignoring the Consumer Rights Act 2015

In contrast to the Sales of Goods Act, the Consumer Rights Act 2015 was introduced to strengthen consumer protections. It ensures that products, including cars, must meet standards of satisfactory quality, fitness for purpose, and as described. If the car is faulty, the consumer has the right to a repair, replacement, or refund, particularly within the first 30 days of ownership. After 30 days and up to 6 months, the consumer is still entitled to repairs or replacements within a reasonable timeframe.

However, many finance companies tend to ignore these consumer rights or downplay them when dealing with repair requests. Instead of acknowledging the consumer’s legal rights under the Consumer Rights Act, finance companies may:

• Refer back to the sales contract between the car seller and themselves, shifting blame away from the consumer’s rights.
• Claim that the fault falls outside of the remit of the Consumer Rights Act because it’s related to “wear and tear,” which is commonly excluded from warranties or protection under the act refer to wear and tear definition in automotive industry. Many extended warranties are disadvantaging consumer as everything they classify as wear and tear issues to not to pay out as the extended warranty contract misleads and takes advantage of the ordinary consumer.

4. Claiming Wear and Tear

One of the most common defenses used by finance companies to avoid paying for repairs is to categorize faults as wear and tear. This label implies that the problem is due to the normal use and aging of the car, rather than a manufacturing defect or simple failure or early failure signs or an issue present at the time of purchase.

For example:

• If your car’s clutch fails within a few months, the finance company might argue that it’s due to wear and tear rather than a defect, even if it seems unreasonable for the clutch to fail so quickly depends on the mileage and age of the car obviously. Manufacturer warranty don’t cover clutch wear too.
• Even more significant issues, such as engine problems or faulty electronics, might be labeled as wear and tear, making it difficult for consumers to get repairs covered.
• Wear and tear definition its considered in automotive as all consumable parts, maintenance parts based on annual servicing requirements, all friction materials related only to brakes and clutch plates, tyres and exhaust, suspension, shock absorbers and wheel bearings are usually classified as wear and tear parts. Anything related to engine and gearbox, differential or powertrain and electrical management systems to those item is not wear and tear parts by nature.

5. Advising Consumers They Won’t Repair the Vehicle

When consumers contact the finance company to report a fault, they may be told that:

• The problem is classified as wear and tear, which isn’t covered by their warranty or finance agreement.
• The Sales of Goods Act protects the seller only (or the finance company itself) from having to repair items that fall under normal wear and tear.
• In reality Finance company should be inspecting the vehicle prior purchase of the vehicle and reducing payments of commissions to sellers.
• Any disputes must be handled with the dealer or seller by finance company, effectively pushing responsibility away.

This often leads to a frustrating situation where the consumer is left without a clear avenue for recourse, even though they might have valid claims under the Consumer Rights Act 2015. So as FCA are failing to clamp down on this issue.

6. What Consumers Can Do

If you find yourself in a situation where the finance company is refusing to cover repairs by claiming “wear and tear” or relying on loopholes in the sales contract, ignoring there is two separate contracts in place and regulated under different laws, here’s what you can do:

• Know Your Rights: Understand your protections under the Consumer Rights Act 2015. If the car is not of satisfactory quality or fails during 6 months of the purchase you are entitled to repairs, replacements, or even a refund.
• Challenge the Wear and Tear Claim: If the issue seems too serious to be dismissed as normal wear and tear, don’t accept the finance company’s interpretation without question. Get an independent mechanic to assess the problem and confirm whether it could reasonably be considered wear and tear.
• Use Alternative Dispute Resolution (ADR): If the finance company refuses to resolve the issue, you can take the case to an ADR body, which is a more cost-effective way of settling disputes outside of court. That is subject if finance company is signed up to any ADR and if it’s part of the complaints process. Alternatively if you have choice and strong case we at CarExamer don’t recommend ADR for time saving purposes.
• Escalate to the Financial Ombudsman: If you believe the finance company is ignoring your rights, you can escalate the matter to the Financial Ombudsman Service, which handles complaints about financial services and can help enforce your consumer rights.

Conclusion

While some car finance companies may try to avoid paying for repairs by interpreting the Sales of Goods Act 1979 in their favor and dismissing the Consumer Rights Act 2015, it’s important to know your rights. Don’t let “wear and tear” be an excuse for avoiding necessary repairs. By understanding your legal protections and challenging unfair practices, you can ensure you’re treated fairly when financing a used car.

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