Bought your car on finance and discovered it's faulty? Here's something most dealers don't want you to know: on most car finance, the finance company – not the dealer – is the party legally responsible for the car's quality, and often easier to deal with. This is the heart of rejecting a car on finance.
Who Actually Sold You the Car?
On Hire Purchase (HP), Personal Contract Purchase (PCP) and conditional sale, the dealer doesn't sell the car to you. The dealer sells it to the finance company, and the finance company supplies it to you under the credit agreement.
In plain English: the finance company is legally the trader you bought from. Under the Consumer Rights Act 2015, that makes them directly responsible for the car being of satisfactory quality, fit for purpose and as described. You don't need a special rule to drag them in – they've been on the hook from day one.
The Dealer's Promises Count Against the Lender Too
Under Section 56 of the Consumer Credit Act 1974, the dealer conducted the sale negotiations as the finance company's agent. Anything the dealer told you about the car – its history, condition or mileage – is treated as if the finance company said it. If those claims turn out to be false, the lender answers for the misrepresentation.
Where Section 75 Fits In
Section 75 of the Consumer Credit Act 1974 makes a credit provider "jointly and severally liable" for breaches of contract or misrepresentation by the supplier – but only where the lender and the supplier are different parties. That's why it covers credit cards (pay even part of the deposit by card and the card issuer is liable for the whole purchase, where the cash price is over £100 and up to £30,000) and dealer-arranged personal loans.
It does not apply to HP, PCP or conditional sale, because there the finance company is the supplier. That's not a gap in your protection – it's the opposite. Direct liability under the Consumer Rights Act is a stronger right than Section 75, not a weaker one. For the card-payment angle, see our Section 75 vs Chargeback guide.
Why Claim Against the Finance Company?
They're Often More Cooperative
Finance companies are regulated by the FCA (Financial Conduct Authority) and take complaints seriously. They have procedures for handling disputes and want to avoid regulatory scrutiny.
The Dealer Can't Ignore Them
When the finance company gets involved, dealers pay attention. Finance companies have ongoing business relationships with dealers and can apply pressure.
Extra Layer of Protection
If the dealer goes bust or refuses to cooperate, the finance company remains liable. You're not left without options.
They Handle the Complexity
Finance companies have legal teams and understand consumer law. They often resolve disputes faster than fighting a dealer directly.
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How to Make Your Claim
Gather your evidence before contacting the finance company – your finance agreement, proof of the fault (photos, videos, diagnostic reports), all correspondence with the dealer, any repair attempts or invoices, and a clear timeline of events.
Write to the finance company formally (email is fine) including your account or agreement number, vehicle details, purchase date and price, a description of the fault, what you've already tried with the dealer, and what you want – whether that's a refund, repair, or compensation. Reference the right laws: the Consumer Rights Act 2015 (specifically satisfactory quality and fitness for purpose), Section 56 of the Consumer Credit Act 1974 if the dealer misled you, and – if you're claiming against a credit card issuer or loan provider – Section 75 of the Consumer Credit Act 1974.
Set a 14-day deadline for them to respond with a proposed resolution. If they reject your complaint, or 8 weeks pass without a final response, escalate to the Financial Ombudsman Service (FOS) – it's free to use and has real powers to order compensation.
What About Voluntary Termination?
If your car is on HP or PCP, you may also have the right to voluntarily terminate the agreement once you've paid 50% of the total amount payable. This is separate from any faulty-car claim and can be useful if you can't prove a fault, you just want out of the agreement, or the car's value has dropped significantly. The key difference is that voluntary termination means you walk away without getting money back, whereas rejecting a faulty car can get you a full refund of payments made plus compensation.
Common Finance Company Excuses (And How to Counter Them)
"You need to deal with the dealer first"
Wrong. On HP or PCP, the finance company is the party that supplied the car – your claim is against them. And where Section 75 applies (credit cards and dealer-arranged loans), it creates joint liability, so you can claim against either party. Either way, you're not required to pursue the dealer first.
"The fault isn't covered because..."
Your Consumer Rights Act rights can't be excluded or limited by the finance agreement. If the car wasn't of satisfactory quality, the finance company is liable.
"It's outside the time limit"
Claims for breach of contract can be made within 6 years. That's much longer than most people think.
"We're just the lender"
On HP or PCP, they're not just the lender – they're the legal supplier of the car. And under Section 56, the dealer negotiated the sale as their agent. That's the law.
Real Example: How It Works in Practice
Sarah bought a BMW 3 Series on PCP for £25,000. Within 2 months, the engine developed a serious fault. The dealer claimed it was "wear and tear" and refused to help.
Sarah wrote to her finance company (BMW Financial Services) citing the Consumer Rights Act 2015 and pointing out that, as her PCP lender, they had supplied the car. Within 3 weeks, they'd:
- Contacted the dealer on her behalf
- Arranged an independent inspection
- Agreed the fault existed at time of sale
- Offered to unwind the agreement with a full refund of payments made
Total time: 6 weeks. If she'd battled the dealer alone, it could have taken months.
The Financial Ombudsman: Your Secret Weapon
If the finance company refuses to help or offers an inadequate solution, complain to the Financial Ombudsman Service (FOS). The FOS can investigate your complaint for free, order the finance company to pay compensation up to £430,000, and make decisions that are binding on the company. Finance companies dislike FOS complaints intensely – they cost them money and affect their regulatory standing. Often, just mentioning the FOS in your correspondence is enough to prompt action.
The Bottom Line
If you bought on credit, you have powerful protection beyond your rights against the dealer alone. On HP, PCP or conditional sale, the finance company supplied your car and is directly responsible for its quality; if you paid by credit card or dealer-arranged loan, Section 75 makes the lender equally liable alongside the dealer. You don't have to pursue the dealer first, and the Financial Ombudsman provides a free, independent route to resolution if the finance company won't cooperate. Keep everything in writing, present your evidence clearly, and don't be deterred by initial rejections – the law is firmly on your side. And if you took out the finance before 2021, it's worth checking separately whether you were mis-sold the finance agreement itself – a distinct claim on the very same agreement, which you can pursue for free.
Bought a faulty car on finance? Check your car – free, and our letters cover dealers AND finance companies.
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