The number of complaints about car finance has soared over the last year, according to new data published this week by the Financial Ombudsman Service (FOS).
The latest data, which covers Q3 2022 (July to September), shows a jump of almost 40% over the previous quarter (April to June). Complaints were also more than double than in the same period a year earlier.
The FOS categorises these under ‘hire purchase (motor)’, which includes the most popular form of car finance, the PCP – which is a form of hire purchase. Car finance is now the third most complained-about finance products, after current accounts and credit cards.
Almost 3,000 new car finance complaints were lodged with the FOS in Q3 2022, and the chart above shows how dramatic this increase has been. The Ombudsman noted that 41% of complaints in Q3 were upheld (ie – the customer won). Of course, that means that the finance company won about 60% of the time, so it’s not great news…
The FOS said that the majority of the complaints in the last quarter were about “charges, fees and commission”, which have overtaken the previously more common complaints about returning goods. Unfortunately, the report does not go any further into detail about what aspects of charges, fees and commissions were generating these complaints.
Is there a link between cost of living squeeze and car finance complaints?
I’ve been asked by two national newspapers in recent days whether the increase in car finance complaints is linked to the current cost-of-living crisis, where rapidly increasing inflation has squeezed households budgets. This has raised concerns about the ability of millions of customers to continue to be able to afford their car finance payments.
We reported our concerns about this back in October, which gained national attention from major media outlets that don’t normally take any notice of car finance issues.
This week’s FOS data offers little detail about the nature of the complaints, other than that they are mostly for “charges, fees and commission”. Whether charges or fees to terminate agreements early or renegotiate payments form part of these complaints is not discussed.
This latest data runs up to September last year, while the cost-of-living crisis continued to accelerate all the way to the end of 2022 and into this year. It will be interesting to see if this trend for a growing number of car finance complaints continues, and what the nature of these complaints are.
The next set of data is due to be published in May, so we’ll report on the findings once we see the numbers.
Car insurance complaints remain high
The FOS reported a similar number of complaints for car and motorcycle insurance in Q3 2022, at just under 2,800. It was ranked fourth, behind car finance, on the Ombudsman’s list of most complained-about financial products. This is a fairly stable number, which has been more or less the same over the last few years, and car/motorcycle insurance is consistently in the top five financial products for complaints.
One of the common complaints for insurance was undervaluations when a car had been written off after an accident or theft. The Financial Conduct Authority issued a warning to insurance companies back in December about undervaluing cars when settling claims, so it will be interesting to see whether these complaints reduce during 2023.
