I purchased a car last year in Sept 2008 from a company called Approved Car Finance. As part of their package they initially pre-arranged finance form a company called The Funding Corporation. After I was told how much I could borrow I was allowed to choose a vehicle from their stock list. At this point I was encouraged to purchase GAP insurance, which was sold to me on the basis that if the vehicle was declared a total loss then my insurance company would pay the current market value and the GAP would cover the difference between that and the remainder of the finance.

I had a no-fault accident this year in July and the vehicle was written off by my insurer. They have now settled and I naturally thought that the GAP insurance would cover the remainder of the settlement figure. They however have only paid a fraction of the balance, stating that their policy only covers up to the recommended book price (Glasses Guide) at the time of purchase. They go on to suggest that the vehicle was £3500 over priced at the time of sale. I have checked the wording of my insurance contract and it does state this fact in the small print. This has left me with a balance of £3500 and the finance company are threatening that if I do not pay this with 14 days then I will be liable for the full remainder of the loan which is over £10,000.

My question is this. Can the retailer who sold me the vehicle, knowingly sell me a car that is substantially over priced and at the same time arrange finance with a insurance product that they must have known would not cover the full amount of the loan in the event of a total loss?

Pls advise as I really don't know where else to turn. I do not have the means to pay the £3500 and I am worried that I will be left with a substantial debt. This feels completely unfair to me but I need to know if it is also illegal?

I'd say this is a difficult one to argue.

Basically they offered to sell you a car at X price, you accepted their offer and paid X for it, therefore you were happy with the price. The duty was on YOU to check the price before you paid it, you had ample opportunity to compare prices and shop around.

Nobody forced or compelled you to purchase the car, and since you had a copy of the terms and conditions of the GAP insurance you were or should have been aware that they would only pay out up to the GG price.

Having said that I'm a bit surprised at the terms of your GAP insurance, your insurers would normally pay out the GG value and the idea of GAP is to make up any shortfall between what GG says (ie what your insurer pays out) and the amount that is outstanding to the finance company.

I don't see what use your particular GAP policy was to you

Mossy

I purchased a car last year in Sept 2008 from a company called Approved Car Finance.

Therein lies your first mistake.

As part of their package they initially pre-arranged finance form a company called The Funding Corporation.

Therein lies your second mistake.

Sadly, the situation you describe is only far too common with people who purchased cars in this manner.

This has left me with a balance of £3500 and the finance company are threatening that if I do not pay this with 14 days then I will be liable for the full remainder of the loan which is over £10,000.

Ok firstly, I'm confused. If, after the payout from your motor insurer, and the reduced payout from the GAP Insurance, there's a balance remaining of £3,500 (E.g. the amount of the reduced payout from the Gap Insurance), then the finance company (even The Funding Corporation) can't pursue you for the full £10k... assuming the full £10k is the current amount oustanding of which £3,500 would be left after the respective payouts from the motor insurance and the Gap Insurance.... they can't simply ignore the fact that £6,500 has been paid towards the loan... to my knowledge they can't even insist that you pay the £3,500 in one go as your obligation to them is to repay the loan over the intitial period agreed so as long as you continue with the monthly repayments you should be fine.

My question is this. Can the retailer who sold me the vehicle, knowingly sell me a car that is substantially over priced...

Absolutely. This particular company is (in)famous for it!

and at the same time arrange finance with a insurance product that they must have known would not cover the full amount of the loan in the event of a total loss?

Same as the answer immediately above I'm afraid.

Although you should be able to pursue a formal complaint (eventually to the ombudsman) in this case.

The retailer/dealership is obliged to sell you an insurance policy that is suitable for your requirements. In this case, knowingly selling you a vehicle for £3,500 more than it was worth (and they WILL have known) and selling you Finance GAP Insurance which included an exclusion that would not cover this £3,500 overpayment, would in my opinion be in contravention of the FSA's (Financial Services Authority) TCF (Treating Customer's Fairly) initiative.

What I suggest you do is this:

1. Continue with your monthly repayments under your original finance agreement. If you miss one of them, the finance company (this one in particular) will pursue you vigorously and charge you hefty penalties for falling in to arrears. Continuing with the monthly repayments shows a continued goodwill on your part. If the finance company is preventing you from making these minimum repayments (e.g. is insisting on payment in full) then seek legal advice, if not from a solicitor then from your local Citizen's Advice Bureau.
    
   
   
2. Check out the complaints procedure for the GAP Insurance policy. it's likely to be administered by a company other than the finance company and the complaints procedure will reflect exactly who it is that you are supposed to write to.
    
   
   
3. Follow the complaint's procedure to the letter. Raise your issue about having been sold the policy incorrectly, specifically that the dealership knowingly sold you a vehicle that was overpriced and ADVISED you to take out GAP Insurance despite them (being experts in their field) knowing that the policy was fundamentally flawed as a result of this overpricing of the vehicle.
    
   Incidentally, you as a consumer do not have access to Glass' Guide valuations (even the valuations that Glass' Guide sell to the consumer via their own website, show different figures than Glass' Guide advise the industry about the same car) therefore you were not in a position to know that the vehicle was overpriced at the time and relied instead on the expertise of the salesperson involved.
    
   
   
4. The GAP Insurance company will then write to you to acknowledge your complaint. They have to do this within: 5 days of receiving your letter.
    
   
   
5. The GAP Insurance company will then write to you with a holding response or a Final Response to your complaint. They have to do this within two weeks of receiving your letter. A holding response must indicate why they are unable to issue a Final Response and specify when they will next be in contact with you
    
   
   
6. Whatever happens the GAP Insurance company HAS to issue a Final Response within 4 weeks of receiving your letter or the matter automatically qualifies to be referred to the Insurance Ombudsman - which in turn means a cost to the company.
   

If the Final Response is not forthcoming within 4 weeks, or the Final Response is not to your liking, you can appeal to the Insurance Ombudsman:

Financial Ombudsman Service

South Quay Plaza

183 Marsh Wall

Docklands

London

E14 9SR

Tel. 0845 080 1800

NOTE - If you bypass the company's complaint's procedure and go straight to the Insurance Ombudsman, the Insurance Ombudsman will refer you back to the company's complaints procedure... hence... follow the complaints procedure to the letter!

The Insurance Ombudsman will then investigate the matter and make a judgement accordingly.

You may (you may not) find that at the prospect of the complaint being referred to the Insurance Ombudsman the GAP Insurance company backs down.

Key phrases to use.

In your letter of complaint, refer to the following:

• The FSA's TCF (Treating Customer's Fairly) initiative, and how you feel the actions of the supplying dealer in mis-selling you this policy is in contravention of TCF.
  
• That you believe the dealer knowingly mis-sold you the policy.
  
• That you as a consumer are not privvy to the same valuation data available to a motor dealer and therefore are/were not able to verify that the vehicle was considerably overpriced.
  
• Demand a response to your letter within two weeks
  
• State that they are required to issue a final response to your complaint within four weeks of receiving it
  
• State that you will be referring the matter to the Insurance Ombudsman if they do not comply with these time-lines.
  
• Be firm but polite at all times.
  

In the meantime...

• Make sure you keep to your monthly payment arrangement under the finance agreement (GAP Insurance will not cover arrears charges and fees at all).
  
• Keep a diary of any/all contact between you, the finance company and/or the gap insurance company.
  

And finally...

Never, ever, EVER, buy a car again from any company with words like "yes", "welcome", "accepted", or "approved" in the company name, nor any company that focuses primarily on the monthly repayment before letting you view their stock!

Always ALWAYS, read the small print. Always ask the dealer to show you what Glass' Guide state the vehicle is worth (if they've nothing to hide they won't mind, and in any case be realistic... e.g. it's not unusual for a vehicle to be sold for more than is stated in Glass' Guide, but there is a line of reason in terms of by how much)... and ultimately you can always purchase a valuation from Glass's Used Car Prices, Vehicle Valuations, Motorbike Prices for £3.50 which although different to the figure the dealer sees will not normally be too far out and perhaps... just perhaps... that £3.50 could have saved you from all this inconvenience now.

As a final point. Never buy GAP Insurance from a motor dealer either. There are plenty of suppliers of GAP Insurance online, who supply policies at far lower prices and will in almost all cases give you far better advice (when asked) in terms of your individual requirements.

Regards

Thank you for your responses. I am still in discussion with the company and have initiated a complaint with the FSA. Your advise has been invaluable ...

Will keep you all posted

I'm sorry to hear about your troubles, I'm looking into reclaiming my insurances with them due to the following:

I took out finance on a car at Approved Car Finance in March 05 and have four payments left. Although I wasn't sold PPI, the lady (and I use this term loosely) told me that I could only access the finance if I took out GAP, Mechanical Breakdown and Rescue & Recovery insurances; the latter two for just 24 months. These insurances were included in the finance and charged at 18.30 per month. On a more serious note, she asked me for cash to seal the deal (£200 to start with), even though they took my old car as a deposit. I was broke and when I told her I didn't have the money, so she asked me how much I did have on me and took that - I can't remember how much, probably £40-£50 at the time.

I was very down on my luck due to unforseen circumstances and very desperate as my old car needed more work doing to it than it was worth and I needed a car for work.

Thankfully, now, things have improved dramatically and my credit file is almost restored but I feel so angry that this company took advantage of me in this way when I was at the lowest point in my life.

Although technically, it wasn't PPI that they mis-sold to me, I recently decided to try to claim my money back and sent the finance company letter one. They replied with 'I've investigated your claim and we did not sell you PPI' - I never mentioned PPI in the letter and just provided the policy number. The cheeky so-and-sos included a Financial Ombudsman leaflet with their response.