Personal Contract Purchase (PCP) is the most popular way to finance a car in the UK. But what happens when your PCP car turns out to be faulty? Here's everything you need to know about rejecting a car on PCP finance.
Understanding Your Position on PCP
When you buy a car on PCP, you don't own it – the finance company does. You're essentially paying for the depreciation, with an option to buy at the end.
This actually gives you extra protection – you have rights against both the dealer AND the finance company. The finance company is jointly liable under Section 75, and because they have ongoing relationships with dealers, they can apply real pressure to get things resolved.
Your Rights When Rejecting a PCP Car
Within 30 Days
You have an automatic right to reject the car for a full refund if it's faulty. You don't have to accept a repair, the finance agreement should be cancelled, all payments you've made should be refunded, and you shouldn't face any penalties.
After 30 Days But Within 6 Months
The dealer can attempt one repair. If that fails (or they refuse), you can then reject. You're entitled to a full refund (possibly minus a small deduction for use) and cancellation of the finance agreement.
After 6 Months
You can still reject if you can prove the fault existed at purchase. The process is the same, but you'll need evidence.
Think you might have a claim?
Check if you're entitled to a refund under the Consumer Rights Act. Free, takes 2 minutes.
Who Do You Contact: Dealer or Finance Company?
Contact both. Here's why:
The dealer sold you the car and is responsible for its quality – they may resolve it quickest. The finance company is jointly liable under Section 75, can pressure the dealer, is your backup if the dealer refuses, and is regulated by the FCA so they take complaints seriously.
Write to both at the same time. This shows you know your rights and aren't going to give up easily.
Step-by-Step: Rejecting Your PCP Car
Step 1: Document the Fault
Gather photographs and videos, diagnostic reports if available, the dates when the fault first appeared, and details of how it affects your use of the car. See our guide on evidence for rejection.
Step 2: Write to the Dealer
Send a formal rejection letter including your details and the car's details, the finance agreement reference, a description of the fault, a statement that you're rejecting under the Consumer Rights Act 2015, a request for full refund and cancellation of the agreement, and a 14-day deadline to respond.
Step 3: Write to the Finance Company
Send a similar letter, also mentioning Section 75 of the Consumer Credit Act 1974, that they're jointly liable for the breach of contract, and that you expect them to facilitate a resolution with the dealer.
Step 4: Stop Driving (If Possible)
If the car is safe and roadworthy, you can continue using it while the dispute is resolved. But if it's dangerous or you're able to avoid using it, doing so may strengthen your position.
You DON'T have to return the car until you've received your refund.
Step 5: Keep Paying (Unfortunately)
This is crucial: keep making your PCP payments while the dispute is ongoing. Stopping payments could damage your credit score, give the finance company grounds to terminate the agreement, and weaken your position. You can claim these payments back as part of your refund.
Step 6: Escalate If Needed
If neither party resolves it, complain formally to both dealer and finance company. Contact the Motor Ombudsman for dealer complaints and the Financial Ombudsman for finance company complaints. Consider small claims court as a last resort.
What Happens to Your Finance Agreement?
When you successfully reject a PCP car:
The Agreement Is Cancelled
The finance company should terminate the agreement as if it never existed.
You Get Your Payments Back
All monthly payments you've made should be refunded – the deposit you paid, all monthly instalments, any interest you've paid, and fees related to the agreement.
You Don't Pay the Balloon
The final balloon payment never becomes due – you're not buying the car, you're rejecting it.
Your Credit Score Should Be Unaffected
A properly handled rejection shouldn't impact your credit file. The agreement should be recorded as cancelled/settled, not defaulted.
What About the Deposit?
Cash Deposit to Dealer
If you paid a cash deposit directly to the dealer, this should be refunded by the dealer.
Part-Exchange Deposit
If your deposit was a part-exchange vehicle, you're entitled to its value back. If the dealer has already sold it, they owe you the value agreed at the time. This can complicate things, so make sure you documented the agreed part-exchange value clearly.
Deposit Paid on Credit Card
If you paid the deposit on a credit card, this gives you Section 75 protection. You can claim through your credit card company if needed, and the credit card company is jointly liable for the whole purchase – not just the deposit amount.
PCP-Specific Complications
Excess Mileage
Don't worry about this when rejecting. Excess mileage charges only apply if you return the car at the end of a normal PCP agreement. A rejection for faults is different.
Condition Charges
Same principle – condition charges are for voluntary returns, not fault-based rejections.
Manufacturer Warranty
Even if there's a warranty, you don't have to claim through it. Your Consumer Rights Act rights exist alongside any warranty and are often stronger.
Can I Voluntarily Terminate Instead?
Voluntary termination (VT) is different from rejection:
| Aspect | Rejection | Voluntary Termination |
|---|---|---|
| Grounds | Faulty car | Any reason (once 50% paid) |
| Refund | Yes – full payments back | No – you just walk away |
| Condition | Car can be faulty | Car must be in good condition |
| Excess mileage | Not charged | May be charged |
Rejection is better if you have a fault because you get your money back. VT is for when you just want out but can't prove a fault.
Recommended reading
Sample PCP Rejection Letter
To: [Dealer Name] and [Finance Company Name]
Re: Rejection of Vehicle – [Registration]
Finance Agreement Ref: [Number]
Dear Sir/Madam,
On [date], I entered into a PCP agreement (reference above) to acquire [vehicle make, model, registration] for a total amount of £[amount].
The vehicle has the following fault(s): [describe faults in detail]
This means the vehicle is not of satisfactory quality as required by Section 9 of the Consumer Rights Act 2015.
I am therefore exercising my right to reject this vehicle under [Section 22/Section 24] of the Consumer Rights Act 2015.
I require:
- Cancellation of the finance agreement
- Refund of all payments made (deposit £[X] + [Y] monthly payments of £[Z] = £[total])
- Removal of the finance agreement from my credit file (as settled, not defaulted)
- Collection of the vehicle at no cost to me
[Finance company]: Under Section 75 of the Consumer Credit Act 1974, you are jointly liable with the supplier for this breach of contract. I expect you to facilitate this resolution.
Please respond within 14 days confirming arrangements.
Yours faithfully, [Your name]
The Bottom Line
PCP gives you strong rights against both the dealer and the finance company. Contact both parties simultaneously and keep paying your instalments while the dispute is ongoing – you'll get all payments back on a successful rejection, including your deposit. Don't worry about excess mileage or condition charges because these don't apply to fault-based rejections. If the finance company refuses to help, the Financial Ombudsman is free and has real power to order compensation. Rejection is always better than voluntary termination when you have a genuine fault, because you get your money back rather than just walking away. And separately, if your PCP was arranged between 2007 and 2024, you may also be owed compensation for finance mis-selling – that's a different claim you can pursue alongside rejection.
Got a faulty PCP car? Check if you qualify for our rejection service. We handle both the dealer and the finance company.
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