Residual values

‘Used car scandal’ headlines a reminder to keep sales pitch transparent

Jonathan Minter and Brian Cantwell look at sales representations of used business cars to consumers

Numerous headlines in 2018 have suggested that thousands of consumers are potentially due compensation for used car they have bought.

Specifically, those who bought cars from retailers who had not disclosed these vehicles were formerly private hire or fleet vehicles could receive hundreds or, according to some reports, thousands of pounds back.

When it comes to the selling of ex-business use vehicles, in November the Advertising Standards Agency published a seemingly straightforward update on selling ex-business use vehicles: “If you’re a fleet operator selling ex-business use vehicles, the ASA will expect information about the ex-fleet nature of the vehicle to be included in your advertising. “

This position came about as a result of its ruling on Glyn Hopkin Ltd and Fiat Chrysler Automobiles UK Ltd (FCA) earlier in the year, when it considered it reasonable to expect FCA to provide records showing how vehicles had been used whilst under their ownership as a fleet operator, including whether they were driven by multiple users.

In this case, FCA provided evidence that the vehicles involved in the case had only been used by one user while part of the fleet. The ASA said the adverts did not state that the cars were previously used for business purposes whilst part of Fiat Chrysler Automobiles UK’s fleet and for that reason the ads breached the Code of non-broadcast Advertising and direct and Promotional Marketing (CAP Code).

While this case involved ex-fleet vehicles, the ASA said it was likely it would take a similar view for ex-hire vehicles to be identified as such in ads.

Now law firm Harcus Sinclair is seeking to bring a group action claim on behalf of consumers who purchases second hand vehicles but were not informed if it was used by a fleet.

“By withholding such information from the purchaser, we will allege that the purchaser was mis-sold their vehicle by the manufacturer or dealer and may be eligible for compensation,” The firm has said.

Speaking to the RAC, Damon Parker, head of litigation at Harcus Sinclar said any buyers who had been mis-sold a vehicle in this way could receive between 25% and 100% of the price paid if the vehicle seller was found to have violated the Consumer Protection from Unfair Trading Regulations 2008.

Regardless, those around the industry have agreed that this is just the latest example of why transparency and accountable sales and marketing process are so important.

Abe Smith, chief executive officer of Dealflo, said, for example: ““While the ASA is encouraging all dealers to review and adjust their advertising, notably online, the threat of litigation still exists if it is deemed that dealers have breached the Consumer Protection from Unfair Trading Regulations (2008).

“While few if any dealers may be able to defend such a position, I urge dealers to act now to change their approach as directed by the ASA and to review their wider sales and marketing processes. They need to establish what, if any, other potential gaps in their processes exist and just as importantly ensure they have clear controls in place to evidence that the entire sales and marketing process has been undertaken in a manner that is beyond reproach.”

But there are some dealers who have not heeded the ASA since then and have paid the price.

In January 2018 a Peugeot dealership in Gateshead was fined £5,000 for failing to disclose to a customer a ‘one previous owner’ car had been used by a car hire firm.

The customer bought the car in January 2017 for around £10,000. Within days the new owner said he noticed a burning smell in the car, and returned it to the dealership, only to be told that the clutch needed replacement.

The dealer said this problem was likely due to his wife’s driving style, and told him he would need to cover the majority of the £650 bill for replacing the part.

It was only after he received the V5 registration documents weeks later he found the previous owner was Europcar.  He then complained to trading standards which, after investigating, was able to confirm the previous keeper had leased the car to Europcar Group UK, and that it had been used as a daily rental car with multiple users.