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I have had a lot to say about PCP’s of late and my new revealing report is now complete – just waiting for the press launch. In the meantime, I’ve received a confidential note from a lawyer to a dealer he represents revealing an interesting twist.

Let me first explain how HP and PCP agreements work and the relationships they create. You may have spent your time researching your car, test driving models and finally making the decision as to what car you want. You may have even added options to the car and negotiated the price but what happens when you enter into an HP or PCP agreement?

Once you’ve been approved for finance the lender will ask the dealer for an invoice that agrees with the price on the order you placed for the car. In turn, you sign an agreement with the lender. At this point, having paid for the car the lender owns the vehicle.

The car never has been and won’t be your car unless you have made all your payments, per the agreement, and an option to purchase fee at the end of the contract term. Now, there is a rule that can confuse the issue which is the 14 day cooling off period rule applied to the finance.

You have a legal right to cancel the finance agreement, which is good news for those who believe they may not have taken out the most favourable finance or may prefer to use their cash to pay for the car. But supposing you decided that the car isn’t quite what you wanted or maybe you feel that your heart ruled your head and you committed to more than you wanted to spend. This is a different situation.

Whilst the law allows you to withdraw from the finance agreement you still have to buy the car, cancelling the finance puts you back to where you were having ordered the car but not taken the finance so you will need to find another way to finance the vehicle. You can still cancel the car order but you will be charged by the dealers for his losses.

However, the law firm has warned dealers that when the dealer sells the car to the finance company they enter into an agreement. Often these agreements are very long and quite complicated but tucked inside the terms is sometimes a clause that says that if the customer fails to accept/take possession of the car or cancels within 14 days of taking the purchase, you, the trader, agree to take back possession of the car and rescind the agreement. As they say, ‘Simply, the consumer can decide they’ve had a change of heart’.

This could be bad news for the dealer but good news for buyers if that clause is in the agreement so if you feel the need to exit the agreement and don’t want the car either you should speak to the finance company and not the dealer. I should finally add that this is not the same as ‘buying under duress’.

For example, you may have had no intention of buying a car but the salesman has put you under so much pressure that you end up signing an order and a finance agreement. In those circumstances, you need to speak to the finance company, Trading Standards via Citizens Advice Bureau and the Financial Ombudsman. This is known as ‘pressured selling’ and is illegal. You are protected under the ‘Consumer Protection from Unfair Trading Regulations 2008’.

Always remember that whilst a vehicle is sold to the finance company your legal rights remain the same as if you bought the car for cash from the dealer. It must be fit for purpose, as described and satisfactory quality. So even if the dealer wrongly described the car you have a claim against the finance provider. By Graham Hill