This section provides a general guidance on some of the laws that apply when you buy a car on finance.

You should talk direct to your car finance provider or seek professional legal advice if you are unhappy about any aspect of your finance agreement. You can also get advice from Consumer Direct or your local Citizens Advice Bureau.

Car dealers who offer finance must hold a consumer credit licence issued by the Office of Fair Trading (OFT). The OFT can refuse to issue a licence if an individual or a company is deemed to be unsuitable. Trading without a licence is a criminal offence and can result in a fine and/or imprisonment.

Individual consumer car finance agreements are covered (“regulated”) by the Consumer Credit Act 1974. Amendments were introduced under the Consumer Credit Act 2006. The terms and conditions of your credit agreement will be laid out clearly and transparently, with your rights and responsibilities clearly spelt out. The Consumer Credit Act also advises finance companies on:

  • what must appear in credit advertising – ensuring that motor finance advertising is clear and simple to understand.
  • rules about ‘up-front’ information which must be disclosed to you before signing a regulated consumer credit agreement – enabling you to shop around and understand key features of the deal.
  • rules about your rights to settle a finance agreement early and how settlement figures are worked out.

Additional protection also exists for customers who arrange finance through motor dealerships. As long as the total amount being borrowed is more than £100, the finance company may be equally responsible with the dealer if your motor car is found to be faulty.

Dealers who sell or recommend insurance-based products, such as extended warranties or GAP (Guaranteed Asset Protection) insurance, are regulated by the Financial Services Authority (FSA). Dealership staff will have received specialist training to sell or recommend these products.