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, so you can settle early without penalty. Under the Consumer Credit Act 1974, you are also entitled to an interest rebate when you repay ahead of schedule, which reduces the total amount owed compared with continuing the agreement. To settle early, request a settlement figure from us, this is valid for 28 days and represents the full amount needed to close your agreement. Other lenders may apply early settlement charges or different rebate calculations, so always check your agreement before settling. For wider information around selling a financed vehicle, see our guide on Selling a Financed Car.
Fully comprehensive insurance is required throughout your finance agreement with AutoMoney Trust, because the vehicle legally belongs to us until your final payment is made. Comprehensive cover protects both you and the lender against damage, theft, fire, and accidents, ensuring the asset is protected for the full term. It is typically more expensive than third party or third party fire and theft cover, so factor this into your monthly running costs when budgeting. Many drivers also consider GAP insurance, which covers the difference between an insurance write-off payout and the outstanding finance balance.
Car finance can affect your credit score in both directions. Consistent, on-time payments build a positive credit history and may improve your score over the life of the agreement, demonstrating to future lenders that you can manage credit responsibly. Missed or late payments have the opposite effect, they are reported to credit reference agencies and can lower your score, making future borrowing harder or more expensive. Applying for finance also creates a hard credit search, which may cause a small short-term dip. Settling your agreement in full further strengthens your credit profile. For more detail, read our guide on Credit Checks for Car Finance.
Yes, under section 99 of the Consumer Credit Act 1974, you have a legal right to voluntarily terminate your hire purchase agreement once you have paid at least 50% of the total amount payable. If you have paid less, you can still apply, but you would need to cover the difference. You must return the vehicle in reasonable condition and clear any arrears. Voluntary termination may still appear on your credit file. If you are unsure whether it is right for you, speak to our team before proceeding, as other options may be available.
