Can I return a car on finance if it's faulty?

Alisa Dan

4 November 2025

If your financed car turns out to be faulty, you can return it — but only through your finance company, not the dealer. They legally own the car until all payments are made, so they’re responsible for fixing the problem.

Under the Consumer Rights Act 2015, you may be entitled to a repair, replacement, or refund, depending on when the fault appears. Within the first 30 days, you can reject the car and end the finance agreement. After that, the company must have one chance to repair or replace it. If that fails, you can reject it for a refund, usually minus a small deduction for use.

What are your rights if you have issues with a financed car?

UK law gives you strong protection when you buy a car on finance. Under the Consumer Rights Act 2015, the vehicle must be of satisfactory quality, fit for purpose, and as described at the time of delivery. If it fails to meet those standards, you’re entitled to a repair, replacement, or refund, depending on how and when the fault arises.

Your finance company carries the legal responsibility for sorting the issue because they are considered the car’s owner until the finance is fully paid off. This also means you can raise complaints about mis-sold finance, hidden costs, or unfair contract terms directly with the lender.

If the fault appears after 30 days but within six months, you must first allow the finance company or dealer one opportunity to repair or replace the car. If the fault remains unresolved or the repair fails, you then gain a final right to reject the car and receive a refund, usually minus a deduction for use.

If the finance company doesn’t resolve your complaint within eight weeks, or you disagree with their decision, you can take the case to the Financial Ombudsman Service, which can order them to put things right. For serious trading breaches or unethical behaviour, you can also report the business to the Financial Conduct Authority (FCA) or Trading Standards.

What counts as a fault with your car?

Not every problem with a car gives you the right to return it. Under the Consumer Rights Act 2015, only faults that make the car unsatisfactory, unfit for purpose, or not as described qualify for a refund, repair, or replacement. Minor issues or normal wear and tear usually don’t count.

Issues that count as faults

• Engine or gearbox problems – loss of power, oil leaks, or gear-slipping that affects drivability.
• Electrical faults – malfunctioning dashboard systems, sensors, lighting, or infotainment screens.
• Brake or steering issues – anything that makes the car unsafe to drive.
• Structural or accident damage – if the car was sold as undamaged but later found to have previous crash repairs.
• Fluid or exhaust leaks – persistent leaks that indicate mechanical failure.
• Starting or charging problems – including faulty starter motors, batteries, or alternators in petrol, diesel, or hybrid vehicles.
• Air conditioning or heating defects – if they stop the car from performing as reasonably expected for its age and price.
• Mismatched description – for example, the car’s mileage, features, or history were misrepresented at sale.

Issues that may not count as faults

• Wear and tear from normal use (for example worn-out brake pads after many miles) is typically not a fault under consumer law.
• A problem that you were told about at purchase (for example dealer disclosed previous damage, you accepted it) may not count as a fault for which you can reject the car.
• A minor issue that doesn’t affect performance, safety or description (for example a small scratch, a bulb that fails) may require repair but not necessarily allow full rejection.

Can you cancel a car finance agreement if the car is faulty?

If your car turns out to be faulty and you decide to reject it, the finance agreement is usually cancelled along with the car return, because the car acts as security for the finance. Once the finance company confirms the rejection is valid, they must settle the agreement, collect the vehicle, and refund any payments made, minus any fair deductions for use.

If you’ve already paid a deposit, it’s normally refunded as part of the settlement. Any outstanding balance, such as early repayment charges, should not apply when the agreement ends due to a proven fault.

If there’s disagreement over the fault or cancellation, you can raise a complaint with the finance provider and escalate it to the Financial Ombudsman Service if unresolved. Throughout the process, continue making payments until the matter is formally resolved to avoid affecting your credit record.

Can I claim if I bought a faulty car on finance and it wasn’t my fault?

Yes, you can claim if the car you bought on finance turns out to be faulty and the problem wasn’t caused by you. The finance company is legally responsible for the car’s quality until you finish paying for it because they technically own the vehicle.

Under the Consumer Rights Act 2015, the car must be of satisfactory quality, fit for purpose, and as described at the time it was supplied. If a fault appears that wasn’t your doing — for example, a mechanical or electrical defect that existed from the start — you have the right to ask the finance provider to repair, replace, or refund the vehicle.

And if the fault makes the car unsafe or unusable, you may also have grounds to end the finance agreement entirely. The finance company must investigate your claim, often by inspecting the car or reviewing an engineer’s report, and then confirm what remedy applies.

If they refuse your claim or delay action, you can escalate the complaint to the Financial Ombudsman Service, which can order the finance provider to put things right.

Rejecting a faulty car on finance

If your financed car turns out to be faulty, remember that you’re the registered keeper, not the legal owner, the finance company owns the vehicle and must deal with the dealer on your behalf. Rejection should always be a last resort, used only when repairs fail or the dealer refuses to cooperate.

You can reject the car once all reasonable repair attempts have been made. Write to your finance provider, explain the issue, and include supporting evidence such as your finance agreement, vehicle details, dealer paperwork, and a mechanic’s report confirming the fault.

If your claim is denied or ignored, escalate it to the Financial Ombudsman Service. And if the dealer or finance company still won’t cooperate, contact the Financial Conduct Authority (FCA) or Trading Standards for further advice. Always buy from a licensed dealer, as this gives you stronger legal protection.

What to do when you have a faulty car on finance

Here’s a clear, no-nonsense checklist you can follow in the UK. I’ll keep it beginner-friendly and cite reliable British sources.

1. Stop driving if it’s unsafe

   If the brakes, steering, or power are compromised, stop using the car and arrange transport to avoid further risk. This helps preserve evidence and safety.

2. Record the problem immediately

   Write down symptoms, dashboard warnings, and when they occur. Photograph/film faults and keep recovery or garage notes. This evidence supports your claim later

3. Gather your paperwork

   Collect the finance agreement (HP/PCP/lease), handover forms, adverts/descriptions, warranty details, and any prior emails or texts. These documents prove “as described” and purchase terms.

4. Tell the finance company in writing (not just the dealer)

   Email the lender (they usually own the car on HP/PCP and are responsible for quality). Include your agreement number, fault description, evidence, and your requested remedy.

5. Keep making payments while it’s investigated

   Missed instalments can harm your credit and complicate the complaint, even if you’re right.

6. Choose the correct legal route based on timin
   • Within 30 days of delivery: you can reject for a full refund (“short-term right to reject”).
   • After 30 days and within 6 months: allow one repair or replacement; if it fails or is unreasonable, you can reject or seek a price reduction.
   • After 6 months: you may need proof the fault existed at supply (engineer’s report).
7. Book an inspection or repair through the lender

   Give the lender a fair chance to inspect and, where applicable, attempt one repair within a reasonable time and without significant inconvenience. Keep all job cards and dates.

8. If repair fails or is refused, escalate your remedy

   Formally request final rejection (refund and agreement unwind) or a price reduction, depending on severity and your preference. Ask the lender to confirm collection, settlement figure, and any use-deduction in writing

9. Settle the agreement correctly when rejecting

   When a valid rejection is accepted, the finance agreement is unwound: the lender collects the car and refunds what you paid, less any lawful deduction for use. Get written confirmation of balance clearance and any deposit refund.

10. Keep admin tidy

    Cancel any related add-ons (GAP, warranties) and update insurance once the vehicle is collected or replaced; request written confirmations for your records. (Good practice aligned with complaint guidance.)

11. If the lender drags its feet, file a formal complaint

    Use the lender’s complaints process first. If unresolved or after their final response, take it to the Financial Ombudsman Service for a free, independent decision.

12. Separate issue: problems with the finance itself

    If your issue is about how the finance was sold (e.g., undisclosed commission or unfair costs), complain to the lender and check FCA guidance on car-finance complaints and current redress developments.