Problems with a financed car: your rights and what to do
If you have bought a car on hire purchase and it develops a fault, you have legal rights that apply regardless of whether the problem appears the next day or several months later. The Consumer Rights Act 2015 sets out what standards the car must meet and what you are entitled to if it does not. This guide covers how those rights apply, who is responsible for sorting the problem, and what to do if the dealer is not cooperating.
Under the Consumer Rights Act 2015, any car you buy from a dealer must be of satisfactory quality, fit for purpose, and as described at the point of sale. These standards apply whether you buy the car outright or on finance, and they apply to used cars as well as new ones, though what counts as satisfactory quality for a used car takes its age, mileage, and price into account.
If the car develops a fault within 30 days of purchase, you have the right to reject it and receive a full refund. This is known as the short-term right to reject. After 30 days but within six months, the law presumes the fault was present at the time of sale unless the dealer can prove otherwise, and you are entitled to one attempt at a repair or replacement before you can claim a price reduction or final right to reject. Beyond six months, the burden of proof shifts and you would need to show the fault existed at the point of sale.
Your legal contract under a hire purchase agreement is with the finance company, not the dealer. The dealer sells you the car, but the finance company is the legal owner until your final payment. This matters because under the Consumer Credit Act 1974, the finance company shares responsibility for the car meeting the standards required by the Consumer Rights Act.
In practice, this means you can raise a complaint directly with your finance provider if the dealer is unresponsive or refuses to help. The finance company has an interest in resolving the issue because they own the asset. They can put pressure on the dealer to carry out a repair, arrange an independent inspection, or in serious cases agree to cancel the agreement and take the car back.
Contact your finance provider in writing as soon as the problem appears. Include a clear description of the fault, when you first noticed it, any evidence such as photos or a garage report, and a record of any contact you have already had with the dealer.
Yes, if the fault is serious enough. If the car is not of satisfactory quality, not fit for purpose, or not as described, and you are within the 30-day short-term rejection window, you can reject the car and the finance agreement should be unwound, with any payments you have made returned to you.
After 30 days, the process is slightly different. You would normally need to give the dealer one opportunity to repair the fault before you can pursue a price reduction or final rejection. If a repair is attempted but fails, or if the fault is so serious that a repair is not reasonable, you can still pursue rejection but the finance company's involvement becomes more important since they are the ones who can formally cancel the agreement.
Do not stop your direct debit or cease making payments without the finance company's agreement. Even if you are in dispute about the car's condition, missing payments creates a separate problem on your credit file and does not pause your obligations under the agreement.
Minor faults do not give you the right to reject the car outright, but they do give you the right to have them put right. If a fault appears that would not have been expected given the car's age, mileage, and price, you can ask the dealer to repair it. If the car was described as recently serviced, in good condition, or with specific features that turn out not to be present or working, that strengthens your position.
Report minor faults to the dealer as soon as you notice them and keep a written record of the conversation. If the dealer refuses to acknowledge or fix the problem, raise it with your finance company. Even a minor issue is worth documenting clearly, partly because it may develop into something more significant, and partly because a clear paper trail makes any later escalation more straightforward.
Start by raising the issue formally with your finance company rather than continuing to pursue the dealer directly. Set out the fault clearly, attach any evidence, and explain what you want to happen. The finance company should investigate and respond within the timescale set out in their complaints process.
If you are not satisfied with the finance company's response, you can take the complaint to the Financial Ombudsman Service (FOS). The FOS is free to use, independent, and can instruct the finance company to take action if they find in your favour. You generally need to have given the finance company eight weeks to respond before the FOS will accept a referral, though there are exceptions if you have received a final response letter.
Citizens Advice and MoneyHelper can both provide free guidance on your options before you decide how to proceed.
If the car is damaged beyond economic repair or is written off in an accident during the finance agreement, your comprehensive insurance policy pays out to the finance company as the legal owner. The payout goes first to settle the outstanding finance balance. If the insurance payout is higher than what you owe, you receive the difference. If it is lower, you may still owe the remaining balance unless you have gap insurance in place.
This is one reason comprehensive insurance is a requirement throughout a hire purchase agreement, not optional. For more on the insurance requirement and what gap insurance covers, see our FAQ on you'll need comprehensive insurance. For more on what happens if a car is written off and what the category ratings mean, see our guide on how to check if a car has been written off.
Not straightforwardly. If the car is in the condition it was when you bought it and meets the standards it was sold as meeting, you do not have a legal right to return it simply because you have changed your mind. You are still bound by the finance agreement.
If your circumstances have changed and you genuinely cannot afford the payments, there are other routes. If you have paid at least 50% of the total amount payable, you may be able to voluntarily terminate the agreement under Section 99 of the Consumer Credit Act. If you have not yet reached 50%, voluntary surrender is an option, though it leaves you liable for any shortfall. For more detail on both routes, see our guides on voluntary termination of car finance and voluntary surrender of car finance.
AutoMoney Trust is a direct lender, regulated by the FCA (FRN 912573), offering hire purchase from £4,000 to £25,000 over 36 to 84 months with no deposit required. We work with a network of approved dealerships across the UK. Check your eligibility on our apply for car finance page with a soft search that will not affect your credit file.
AutoMoney Trust does not charge early repayment fees on its Hire Purchase finance agreements, meaning you can complete your car finance settlement without paying additional penalty charges. Whether you want to pay off your finance early, reduce your monthly commitments or sell your vehicle, settling your agreement ahead of schedule can provide greater financial flexibility and may reduce the overall cost of borrowing.
Under the Consumer Credit Act 1974, customers who repay their Hire Purchase agreement early are generally entitled to an interest rebate. This means you do not usually pay all of the interest that would have been charged over the remaining term, reducing the total amount payable compared with continuing your monthly repayments until the end of the agreement.
If you would like to arrange a car finance settlement, you can request a settlement figure from AutoMoney Trust. This shows the total amount required to repay your finance agreement in full, taking into account any applicable interest rebate. Your settlement figure is valid for 28 days, giving you time to review the amount and decide whether early settlement is right for you.
Settlement policies can vary between lenders. While AutoMoney Trust does not charge early repayment fees, some providers may apply early settlement charges or calculate interest rebates differently. Before choosing to pay off your car finance early, always check the terms of your agreement and understand how your settlement amount has been calculated.
If you are considering a car finance settlement because you want to sell a financed car or part exchange your vehicle, our guide on Selling a Financed Car explains the process, what happens with outstanding finance, and the options available.
Yes, fully comprehensive insurance is required throughout your finance agreement with AutoMoney trust. The is because the vehicle legally remains the property of the finance provider until your repayment has been made and ownership has transferred to you.
Comprehensive car insurance provides protection against a range of situations, including accidental damage, theft, fire and third-party claims. Keeping the vehicle insured for the full duration of your agreement helps protect both you and the lender by ensuring the car remains covered throughout the finance term.
When budgeting for a financed car, it is important to consider insurance as part of your overall running costs. Fully comprehensive cover is often more expensive than third party or third party fire and theft insurance, so make sure you include this alongside your monthly finance payments, fuel, servicing, and other vehicle expenses.
Some drivers choose to consider GAP insurance, which can help cover the difference between your insurer's settlement value if the vehicle is written off and the remaining balance on your car finance agreement when the outstanding balance may be higher than the vehicle's market value.
Yes, car finance can affect your credit score in both positive and negative ways. Successfully managing a car finance agreement by making regular, on-time payments can help build a positive credit history. This sows future lenders that you can manage credit responsibly and may improve your credit profile over time.
However, missed or late payments can have the opposite effect. If payments are not made on time, they may be reported to credit reference agencies, which can lower your credit score and make future borrowing more difficult or potentially more expensive.
When you apply for car finance, a lender may carry out a hard credit search, which appears on your credit file and can cause a small, temporary change to your credit score. This is a normal part of the application process and helps lenders assess whether finance is affordable and suitable for you.
For more information about how applications are assessed, read our guide on Credit Checks for Car Finance.
Yes, under section 99 of the Consumer Credit Act 1974, customers have a legal right to voluntarily terminate your hire purchase agreement once they have paid at least 50% of the total amount payable under the agreement. This is known as voluntary termination (VT) and allows you to end your car finance agreement early without having to make the remaining monthly payments, provided the required conditions are met.
If you have paid less than 50% of the total amount payable, you may still be able to request voluntary termination of your car finance, but you would need to pay the difference before the agreement can be ended. The vehicle must also be returned in reasonable condition, and any outstanding arrears or missed payments will need to be cleared.
Choosing voluntary termination on a hire purchase agreement may be recorded on your credit file and could be considered by future lenders when assessing applications. Before deciding whether this is the right option for your circumstances, we recommend speaking to AutoMoney Trust. Our team can explain the process, discuss any alternatives and help you understand the potential impact on your finance agreement.
