Motorists with car finance to get three-month payment freeze

The Financial Conduct Authority has confirmed anyone with a car finance PCP or PCH will be able to freeze payments for three months

Car finance assistance measures announced

Customers with a car on finance can now access a three-month payment freeze under temporary new measures introduced by the Financial Conduct Authority.

Anyone with a PCP or PCH car finance plan will, if they’re struggling to make payments due to the coronavirus crisis, be able to request the payment freeze.

Finance companies should not take steps to end the agreement or repossess the vehicle during the payment freeze period, says the FCA.

Customers will continue to be allowed to drive the car.

ALSO READ: Car finance explained: the difference between PCP, PCH and leasing

“We have worked at pace to introduce temporary financial relief,” said FCA interim chief executive Christopher Woolard.

“These measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments.”

No strings attached

Payment freezes should come without strings attached, says the FCA.

Car finance companies should not alter the terms of Personal Contract Purchase or Personal Contract Hire agreements in an unfair way.

They should not, for example, recalculate PCP end-of-term balloon payments due to a coronavirus-related fall in used car values.

Firms should “act fairly where terms are adjusted”.

Many PCP customers rely on the ‘equity’ at the end of a PCP term to help finance a new agreement: recalculating values to a lower level would have a big impact.

Those who have reached the end of their agreement and want to keep their car, but don’t have the cash to cover the balloon payment due to coronavirus-related difficulties, should also be helped, says the FCA.

“Firms should work with the customer to find an appropriate solution.”

The new measures come into force on Monday 27 April.

“Customers should be able to request a payment deferral at any point,” says the FCA, “for a period of three months.”

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Richard Aucock
Richard Aucockhttps://www.richardaucock.co.uk/
Richard is director at Motoring Research. He has been with us since 2001, and has been a motoring journalist even longer. He won the IMCO Motoring Writer of the Future Award in 1996 and the acclaimed Sir William Lyons Award in 1998. Both awards are run by the Guild of Motoring Writers and Richard is currently vice chair of the world's largest organisation for automotive media professionals. Richard is also a juror and Steering Committee director for World Car Awards and the UK juror for the AUTOBEST awards.

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