Drivers who are struggling to meet their car finance payments due to coronavirus will be able to apply for a three-month freeze, according to new proposals announced today by the Financial Conduct Authority (FCA).
The measures are set to be introduced from April 27, and indicate to finance providers that Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) – two of the most popular forms of car finance – should not be recalculated in a way 'that is unfair'.
This includes trying to recalculate PCP final balloon payments based on the temporary fall in car prices caused by the Covid-19 pandemic.
In addition, if a car owner reaches the end of their PCP agreement but does not have enough money to cover the final balloon payment due to the coronavirus having an effect on finances, providers should work with the customer to find an 'appropriate solution'.
— Financial Conduct Authority (@TheFCA) April 24, 2020
Though firms don't have to follow the measures, the FCA has said that it expects companies to honour them and can take enforcement action if customers aren't treated fairly.
Christopher Woolard, interim chief executive at the FCA, said: "We have worked at pace to introduce temporary financial relief tailored for a range of specific credit products. Many firms are already working with their customers, but these measures ensure all consumers affected by the coronavirus emergency can apply for a temporary freeze on their payments."
The move was welcomed by motoring organisations, with James Fairclough, CEO of AA Cars, saying: "The millions of drivers with car finance deals will be greatly reassured to know the FCA has their back.
"However it's important to note that lenders will not make special arrangements automatically. The onus is on drivers to contact their lender before they run into difficulty. Call centres are understandably busy at present, but many providers are offering payment holiday request forms online."