How to Dispute a Hire Purchase or Conditional Sale Agreement in the UK
Most people who sign a hire purchase or PCP agreement have no idea they can hand the car back and walk away once they have paid half. Even fewer know that the dealer who sold them the finance deal may have set the interest rate higher than necessary — and pocketed the difference as undisclosed commission.
The FCA's motor finance review — announced in January 2024 — found that millions of PCP and HP agreements were sold with Discretionary Commission Arrangements (DCAs) in place: a system that let dealers earn more by charging customers a higher rate, without telling them. The FCA banned the practice in January 2021. In October 2024, the Court of Appeal ruled that undisclosed commission in these arrangements was unlawful — that brokers owed customers a fiduciary duty that the commission system breached.
If you are currently in, or have ever had, a hire purchase, conditional sale, or PCP agreement, there is a real chance you have been overcharged. And entirely separately, if your circumstances have changed, you may have a statutory right to terminate the agreement right now — regardless of how much is left to pay. The Consumer Credit Act 1974 gives you both. Neither right is explained at the dealership.
Key facts
- —Legal basis: Consumer Credit Act 1974 (sections 99–100, 75, 140A)
- —Voluntary termination right: Available after 50% of the total amount payable (not just the car price) has been paid
- —Undisclosed commission: FCA investigation ongoing — complaints pause lifted for most complaint types
- —Escalation route: Financial Ombudsman Service (FOS) — free, binding on the lender
- —Time limit: 6 years from agreement date, or 3 years from knowledge of mis-selling (whichever is later)
What is a hire purchase or conditional sale agreement?
The terminology matters because each product carries slightly different legal consequences — though all three are regulated under the Consumer Credit Act 1974.
Hire Purchase (HP)
You hire the vehicle and pay instalments. You do not own the car until you make the final payment (and, in some agreements, pay a nominal 'option to purchase' fee). During the agreement, the finance company owns the vehicle. This is legally significant: because the finance company is the owner, they share liability for faults and misrepresentation under Section 75 of the CCA 1974.
Conditional Sale
Almost identical to HP in structure, except that ownership passes automatically on the last payment — there is no separate option to purchase. Your rights under the CCA 1974, including the voluntary termination right and Section 75, apply in exactly the same way.
PCP — Personal Contract Purchase
A variant of conditional sale where a large 'balloon payment' (the Guaranteed Minimum Future Value, or GMFV) is deferred to the end of the agreement. At the end, you can pay the balloon and own the car, return the vehicle (subject to mileage and condition), or part-exchange. PCP agreements are regulated under the CCA 1974 and carry the same voluntary termination rights as standard HP — though calculating the 50% threshold requires care because of the balloon structure.
Personal loan — different rules
If you borrowed money from a bank or lender to buy a car outright (rather than through HP/CS/PCP), the agreement is a personal loan, not hire purchase. You own the car from day one. Section 75 protection applies differently, and there is no voluntary termination right under s.99 — your dispute routes are different. This guide focuses on HP, conditional sale, and PCP only.
All three products are regulated by the Consumer Credit Act 1974 if the agreement is for credit under £25,000. Amendments made in 2008 extended CCA protection to many agreements above that threshold too, so even higher-value HP agreements may be regulated. Check your agreement — it will state whether it is regulated under the CCA on the front page.
Voluntary termination — your right to walk away
Section 99 of the Consumer Credit Act 1974 gives you the right to voluntarily terminate a regulated HP or conditional sale agreement at any time before the final payment is due — provided you have paid at least 50% of the total amount payable. This right is written into statute. The finance company cannot remove it by contract, and it is not a hardship provision — you do not need to explain your reasons.
The 50% threshold — calculating it precisely
The single most common mistake is calculating 50% of the vehicle price instead of 50% of the total amount payable. These are different numbers and the distinction matters.
The total amount payable is printed on the front page of your credit agreement. It includes the vehicle price, all interest charges, any arrangement fees, and any other costs stated in the agreement. Add up every payment you have made so far — your monthly payments plus any deposit or part-exchange contribution. If that total equals or exceeds 50% of the total amount payable figure in your agreement, you can terminate today.
Example: Total amount payable in your agreement: £18,000. 50% threshold: £9,000. Deposit paid: £2,000. Monthly payments of £250 × 30 months paid: £7,500. Total paid: £9,500 — above the threshold. You can terminate.
What Section 100 says you owe on termination
Once you have met the 50% threshold, Section 100 provides that you owe nothing further beyond that threshold — plus any arrears and any liability for damage to the vehicle beyond fair wear and tear. You are not liable for the remaining monthly payments, any early repayment charge, or the finance company's loss on the residual value of the vehicle.
Step-by-step: how to voluntarily terminate
Calculate your 50% threshold
Find your agreement and identify the 'total amount payable' figure. Add up all payments you have made to date, including any deposit. If the total equals or exceeds 50% of the total amount payable, you are eligible.
Write a VT notice to the finance company
The voluntary termination notice must go to the finance company — not the dealer, not the manufacturer. Send it by recorded delivery and keep your proof of postage. State clearly: (a) your agreement number, (b) that you are exercising your right to voluntary termination under Section 99 of the Consumer Credit Act 1974, and (c) that you will make the vehicle available for collection.
Arrange return of the vehicle
The finance company will arrange collection, or ask you to return the vehicle to a nominated point. Do not hand the keys to the dealer — the contract is with the finance company, and handing the car to the dealer without a formal VT notice in place is not a voluntary termination. Take photographs of the vehicle before it is collected, documenting its condition from every angle.
Dispute any unfair damage charges
The finance company may issue a damage assessment after collecting the vehicle. You are only liable for damage beyond fair wear and tear — the industry standard is the British Vehicle Rental and Leasing Association (BVRLA) Fair Wear and Tear Guide. If a charge does not meet BVRLA standards, reject it in writing and request the full damage assessment report. You can escalate to the Financial Ombudsman Service if the company refuses to withdraw an unfair charge.
Finance company tactics to watch out for
Claiming VT is only available in hardship
False. Section 99 is an unconditional statutory right. You do not need to demonstrate financial hardship, redundancy, or any other circumstance. Any finance company that tells you otherwise is wrong.
Inflating the damage assessment
Finance companies sometimes charge for damage that falls within normal wear and tear. Request the full damage report and compare every item against the BVRLA guide. Dispute anything that does not meet the standard — the FOS regularly rules against finance companies on inflated damage claims.
Charging admin fees for VT processing
Some finance companies attempt to charge an administration fee for processing a voluntary termination. These fees are often unenforceable — Section 99 creates the right without qualification, and adding fees that deter its exercise may be challenged as unfair under the Consumer Rights Act 2015.
Mis-sold finance — the undisclosed commission scandal
Until January 2021, most car finance deals in the UK were sold through a system called a Discretionary Commission Arrangement (DCA). Under a DCA, the dealer — acting as a credit broker — could set the interest rate for your finance deal within a range set by the lender. The higher the rate they set, the more commission they earned. You were never told about this.
Millions of customers paid more for their car finance than they should have, simply because the dealer chose a higher rate to maximise their own commission. The FCA banned DCAs on 28 January 2021 after identifying the conflict of interest. In January 2024, the FCA announced a formal review of historical DCA complaints.
The Court of Appeal ruling — October 2024
In October 2024, the Court of Appeal handed down its judgment in Johnson v Firstrand Bank (and two related cases). The court held that car dealers acting as credit brokers owed their customers a fiduciary duty — a duty to act in the customer's best interests. Receiving undisclosed commission that created a conflict of interest breached that duty. The court found that the commission arrangements were unlawful and that customers were entitled to redress.
The Supreme Court heard appeals from the finance industry in early 2025. While proceedings continue, the FCA's complaints pause (which had delayed some DCA complaint timelines) has been lifted for most complaint types — meaning you can complain now and your finance company must respond within the usual 8 weeks.
What you can claim
The basis of a DCA complaint is that you were charged a higher interest rate than you would have been offered had the dealer not had a financial incentive to raise it. The redress calculation is the difference between the total interest you actually paid and the total interest you would have paid at the lowest available rate at the time.
Who to complain to: Write to the finance company (the lender named on your agreement — e.g. Black Horse, Santander Consumer Finance, Moneybarn, MotoNovo), not the dealer. The dealer is no longer trading in most historic cases. The finance company is the FCA-regulated entity responsible for your complaint.
In your complaint letter, state: (a) the date and amount of the agreement, (b) that you believe a discretionary commission arrangement was in place between the dealer and the lender, (c) that this was not disclosed to you, (d) that you are requesting disclosure of any commission arrangement and the rate range available at the time, and (e) that you are claiming redress for the difference in interest. If the company does not respond within 8 weeks, or rejects your complaint, escalate to the Financial Ombudsman Service (FOS).
Other grounds for dispute
Section 75 CCA 1974 — creditor liability for dealer misrepresentation
Section 75 of the Consumer Credit Act 1974 makes the finance company jointly liable for any misrepresentation or breach of contract by the dealer, provided the cash price of the goods was between £100 and £30,000. If the dealer told you the car had a full service history and it didn't, or described the mileage incorrectly, or made promises about the vehicle that turned out to be false — you can claim against the finance company directly, even if the dealer has since closed or gone into administration.
Section 140A CCA 1974 — unfair relationship
Section 140A is a broad catch-all provision that allows a court (or the FOS) to look at the totality of the relationship between a lender and a borrower. If the terms of the agreement, the way it was sold, or the way the lender has exercised their rights are unfair — in any respect — the court can rewrite or discharge the agreement entirely. Undisclosed commission is one basis for an unfair relationship claim; so is a contract that placed all the risk on the customer while all the protection sat with the lender.
Early settlement — Sections 94 and 95A
Under Section 94, you have the right to settle your agreement early at any time by paying the outstanding balance. The finance company must provide you with a settlement figure within 7 working days of your request. Section 95A caps the early settlement charge at 1% of the amount repaid early — or 0.5% if less than one year remains on the agreement. Any charge above that statutory cap is unenforceable.
Faulty vehicle — Consumer Rights Act 2015
Under an HP agreement, the finance company owns the vehicle during the contract period. That makes them the seller for the purposes of the Consumer Rights Act 2015 — not just the dealer. If the car develops a fault within the first 6 months of delivery, the law presumes the fault existed at the time of sale (the reverse burden of proof). The finance company is obliged to repair or replace — and if that is not possible, to give you a price reduction or refund. Your complaint goes to the finance company, in writing, citing the Consumer Rights Act 2015 and your statutory right to a remedy. After 6 months, the presumption no longer applies, but you retain the right to claim if you can show the fault existed at the point of sale.
See our guide on faulty goods and the Consumer Rights Act 2015 for a full breakdown of the 30-day right to reject, repair and replacement rights, and how to write the letter.
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What not to do
Don't stop paying without issuing a formal VT notice first
If you stop making payments without sending a formal voluntary termination notice to the finance company, that is a default — not a termination. The finance company can pursue you for the full outstanding balance, damage your credit file, and issue a default notice. VT must be initiated in writing before you stop paying or return the vehicle.
Don't hand the keys to the dealer
Your agreement is with the finance company, not the dealer. Handing the keys to the dealer without a formal VT notice accepted by the finance company is not a voluntary termination. You remain liable under the agreement. All VT correspondence must go to the finance company directly, by recorded delivery.
Don't accept a damage charge without checking the BVRLA guide
The British Vehicle Rental and Leasing Association (BVRLA) Fair Wear and Tear Guide is the industry-standard reference for what constitutes acceptable wear on a returned vehicle. If the finance company's damage assessment includes items that fall within BVRLA standards — light scuffs, minor stone chips on the bonnet, tyre wear within limits — reject those charges in writing and cite the BVRLA guide.
Don't use a claims management company for a DCA complaint
CMCs take 25–30% of any redress you receive for mis-selling complaints. The Financial Ombudsman Service is free to use. You write the complaint letter yourself, submit it to the finance company, and escalate to the FOS if needed. A CMC provides no additional access, no legal advantage, and no information you cannot obtain yourself — they simply take a large cut of money you are legally owed.
Don't miss the 6-month FOS window
Once the finance company sends a final response letter, you have exactly 6 months to refer the complaint to the Financial Ombudsman Service. The FOS has limited discretion on late referrals. Missing this window almost always means losing your right to FOS adjudication. Act on a final response letter the moment you receive it.
Scotland, Wales, and Northern Ireland
The Consumer Credit Act 1974 applies across the entire United Kingdom. Voluntary termination rights under Section 99, creditor liability under Section 75, the unfair relationship provisions of Section 140A, and the DCA complaint route are all equally available to consumers in Scotland, Wales, and Northern Ireland.
Scotland
The small claims procedure in Scotland is called Simple Procedure and handles claims up to £5,000. For claims above that figure, the Sheriff Court's Summary Cause procedure applies. Court terminology differs — there is no 'county court' in Scotland — but the FCA-regulated complaint route and FOS jurisdiction are identical. If you escalate a hire purchase dispute to the FOS, the process is the same regardless of which nation you are in.
Wales
Welsh consumers have identical CCA 1974 rights. The county court system applies. For disputes against Welsh-registered finance companies, the FOS handles complaints in the same way. There are no Welsh-specific rules that differ from the England and Wales framework on vehicle finance.
Northern Ireland
County Court jurisdiction applies for enforcement in Northern Ireland. FOS jurisdiction is the same — Northern Ireland consumers can refer complaints to the Financial Ombudsman Service on the same terms as consumers in the rest of the UK. CCA 1974 rights are identical.
Legislation that applies to hire purchase and conditional sale disputes
- —Consumer Credit Act 1974: s.75 (creditor liability for dealer misrepresentation); s.94 (early settlement right); s.95A (cap on early settlement charge at 1% / 0.5%); s.99 (voluntary termination right); s.100 (liability on voluntary termination); s.140A (unfair relationship — broad catch-all).
- —Consumer Rights Act 2015: Faulty goods rights — 30-day short-term right to reject; repair and replacement; price reduction. Applies to HP agreements because the finance company is the owner and therefore the seller.
- —Financial Services and Markets Act 2000: Grants the FCA its regulatory powers over consumer credit firms. Underpins the FCA's authority to ban DCAs and conduct the motor finance review.
- —FCA CONC sourcebook: Consumer Credit sourcebook — sets responsible lending standards, commission disclosure requirements, and the conduct of business rules that finance companies must follow. Breach of CONC is the basis for most FOS complaints.
For a broader overview of vehicle finance rights, see our guide on how to challenge a vehicle finance agreement in the UK.
The Consumer Credit Act 1974 gives consumers more rights over HP and conditional sale agreements than almost any other consumer contract in English law — a statutory right to walk away after paying half, a creditor jointly liable for the dealer's misrepresentation, an unfair relationship provision broad enough to catch almost any unconscionable conduct, and now a live FCA investigation into millions of agreements sold with undisclosed commission. None of these rights are explained at the dealership. Most finance companies rely on customers not knowing they exist. Now you do.
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Write my letter now →Frequently asked questions
Can I return a hire purchase car before the agreement ends?
Yes. Under Section 99 of the Consumer Credit Act 1974, you have a statutory right to voluntarily terminate a hire purchase or conditional sale agreement once you have paid at least 50% of the total amount payable (not just 50% of the car's price — the total includes all interest, fees, and charges). This right cannot be contracted away. You write a voluntary termination notice to the finance company — not the dealer — and return the vehicle in a condition consistent with fair wear and tear.
What is the 50% rule in a hire purchase agreement?
The 50% rule comes from Sections 99 and 100 of the Consumer Credit Act 1974. Once you have paid half of the 'total amount payable' stated in your agreement — which includes the vehicle price, all interest, and any fees — you can hand the car back and owe nothing more, other than any arrears and repair costs for damage beyond fair wear and tear. The key figure is the total amount payable printed in your credit agreement, not the price of the car alone.
How do I claim back money from an undisclosed dealer commission?
Write a formal complaint to the finance company (not the dealer) stating that you were not informed of any commission arrangement between the dealer and the lender that may have influenced your interest rate. Cite the Court of Appeal's October 2024 ruling in Johnson v Firstrand Bank, which held that undisclosed commission is unlawful where a broker owes a fiduciary duty. Request disclosure of any commission arrangement and claim the difference between the rate you were charged and the lowest available rate. If the finance company rejects or does not respond within 8 weeks, escalate to the Financial Ombudsman Service.
What happens if the car develops a fault under a hire purchase agreement?
Under a hire purchase agreement, the finance company — not you — owns the vehicle until the final payment. That makes them the seller for the purposes of the Consumer Rights Act 2015. If a fault appears within the first 6 months, the law presumes it existed at the time of sale and you are entitled to a repair or replacement (or, failing that, a price reduction or partial refund). Your complaint goes to the finance company, not just the dealer. If the fault appears after 6 months, you still have rights but the burden of proof shifts to you.
Do I need a solicitor to make a hire purchase complaint?
No. The Financial Ombudsman Service is free to use and handles hire purchase complaints including voluntary termination disputes, undisclosed commission claims, Section 75 misrepresentation claims, and faulty vehicle complaints. You write to the finance company first, then escalate to the FOS if they reject or do not respond within 8 weeks. Do not use a claims management company — they take 25-30% of any redress and provide no service that you cannot access yourself at no cost.
Fight My Corner provides dispute letter generation tools and guidance — not legal advice. For complex cases involving significant sums, or if court proceedings have already started, consider seeking advice from a consumer credit solicitor or your local Citizens Advice bureau.