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I would like to borrow
£1,500
To pay back over
3.5 years

Representative Example: Borrowing £5,500 over 48 months with a representative APR of 19.8%, the amount payable would be £163 a month, with a total cost of credit of £2,283 and a total amount payable of £7,783.

Is there PPI on car finance?

If you bought a car before 2011, you perhaps dealt with a finance company that provided a ‘bundle’ of products when you got your loan. That bundle sometimes included payment protection insurance – otherwise known as PPI.

Unfortunately, PPI was often sold to a customer even if they didn’t need it, or in some cases,  even if customers didn’t realise they were paying for it. This mis-selling led to a national financial scandal – and has resulted in billions of pounds being paid out to victims.

While PPI mis-selling dominated consumer finance news for a number of years, there are still cases in which PPI is sold legitimately and can provide useful cover for car finance payments.
Here, we’ll look at what PPI is, whether you can still claim, and the circumstances in which PPI is still used.

What is PPI?

PPI was a type of insurance product that was sold with a range of finance products – including car loans. It was designed to protect you if you were unable to work and could no longer make the repayments needed to keep your car. For instance, if you were made redundant – you may have been able to claim on your PPI and have you finance payments paid for a certain period of time.

In some cases, PPI was added to the amount you borrowed to buy your car upfront, although in other cases, PPI was a monthly add-on to your premium and paid separately to your loan repayment. Adding PPI to a car loan upfront was banned in 2009 – and shouldn’t have been sold after that.

Can you still claim if you were mis-sold PPI?

If you had a claim for PPI compensation, the deadline has unfortunately now passed for claims against the companies that offered car loans with PPI.

That said, there are some exceptions to this rule. If your PPI policy was sold after 29 August 2017, you may still be entitled to claim. Also, if you started your claim before the 29 August 2019 deadline, you should still expect to hear back from the company in question.

Is PPI still available from car finance companies?

Although it has received overwhelmingly bad press since the scandal broke, PPI was a legitimate insurance product that could benefit some people. As such, PPI and similar products are still available – sometimes still known as PPI, or sometimes as ‘income protection’ or ‘loan protection’.

Since the problems with PPI, lenders can no longer ‘bundle it in’ as part of your finance deal – and you’ll generally have to go to an independent insurance firm to get it. Typically, a policy will protect a portion of your income if you’re not able to work – usually for up to 12 months.

Should you consider PPI for a car loan?

Whether or not you might benefit from a payment protection insurance policy is completely down to your personal financial circumstances. If you’re unlikely to be able to continue paying your car finance if you’re out of work – it might be worth exploring in a little more detail. 

That said, you might find you have insurance that already covers you – if you pay into a critical illness insurance policy for example. 

If you feel like PPI insurance might be ideal for you, it’s best to get advice from an insurance company who is authorised by the Financial Conduct Authority to give advice about insurance products. You may also wish to seek this advice from an accredited independent financial advisor.

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

Dealerships and banks have access to some slightly different finance products. Banks can offer personal loans – and dealers can sometimes offer special promotions like 0% APR. Since you’re free to choose – you should compare all options available to you.

If you want to sell a used car with a loan, check the details of your agreement carefully. Unless you’re the legal owner of the car, you won’t be able to sell it until you’ve paid a settlement figure.

No, you cannot transfer your car finance to another car. However, depending on your circumstances, you may be able to settle your current finance agreement and begin a new one on a different vehicle.

When determining interest rates on car loans, lenders take a range of factors into account, including the size of the loan and your credit rating.

You can approach lenders directly to get a car loan for a used car. However, it’s often best to use an online broker instead. This approach can save you time and help you to find the most competitive deals.

In many cases, yes, changing or part-exchanging a car with outstanding finance is possible. Since car finance can’t be moved from one car to another, you (or a dealership you’re getting your next car from) will have to settle the current loan and begin another on your next vehicle.

One of the easiest ways to check if you can get car finance is to use online affordability calculators.

Whether or not you can return a financed car depends on the type of agreement you have. If you’ve got a hire purchase (HP) or personal contract purchase (PCP) plan, you’re allowed to hand it back – as long as you have paid off at least 50% of the loan, including any fees and interest.

Applying for a car loan in someone else’s name is referred to as ‘accommodation finance’. This is likely to be against the finance company’s terms and conditions – and, in some cases, it could be considered to be fraud.

As well as checking your credit rating, car finance companies will need some details about the vehicle you’re planning to buy – and some information about your current employment and accommodation situation.