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Responsibility for breakdown costs when vehicle bought with finance company funds

A sorry tale of sale and purchase 

Darryl and Petra had purchased a number of vehicles at auction with finance provided in each case by Bestcars Finance Limited (Bestcars). Before their latest purchase, Darryl and Petra approached Bill of Bestcars to confirm it would finance a particular vehicle they had already picked out. Darryl and Petra registered for the auction and bought their chosen vehicle. They then signed a loan agreement with Bestcars in exchange for a cheque for the purchase price which they took to the auction house.  The vehicle was registered in Darryl and Petra’s names and they took possession. Several days later, Darryl and Petra contacted Bill asking about having a mechanical breakdown warrant (MBW) attached to the loan agreement. Bill replied that it would cost $930 for three years and that Bestcars would purchase it on receipt of one half of that amount. Bill heard nothing further from Darryl and Petra. 


The vehicle broke down and Darryl and Petra discovered a number of major flaws which should have been picked up if the vehicle had been checked prior to auction. Darryl and Petra approached Bestcars who they felt should take responsibility for fixing the vehicle because it had failed to have the vehicle checked before the auction or arrange an MBW. Bestcars denied any responsibility. 


Darryl and Petra stopped making payments to Bestcars and some months later the vehicle was repossessed. 


The complaint 

Darryl and Petra complained that when they first approached Bill of Bestcars, he promised to have the vehicle AA checked.  Bill was at the auction with them and encouraged them to bid. They expected a MBW to be arranged as had happened with all the previous loan contracts with BFL. Therefore Darryl and Petra held Bestcars responsible for the problems they experienced and expected it to pay to have the vehicle fixed. 


Darryl and Petra also said they had arranged with Bestcars to suspend loan repayments while the vehicle was being repaired. Darryl and Petra questioned the repossession of the vehicle in breach of that arrangement. They did not receive a pre possession notice which was sent to a previous address although they had given their new address to BFL. 


Darryl and Petra wanted the return of the vehicle with a warrant of fitness, all the loan arrears cleared, and a refund of $1500 they had paid for new tyres. 


Bestcars’ position 

Bestcars confirmed that Darryl and Petra had contacted Bill about a vehicle they wanted to buy at auction and that he was at the auction when they bought the vehicle. However, Bestcars noted that Darryl and Petra registered for the auction and that the invoice was made out in Darryl’s name. Bestcars was not involved in the purchase other than agreeing to provide finance.  It was up to Darryl and Petra to choose the vehicle they wanted. BFL did not carry out any mechanical check or test drive it and it did not mechanically check vehicles through the AA. 


Bestcars also confirmed that a few days after the auction Darryl and Petra sent Bill a text message about having a MBW attached to the loan contract. Bill replied that it would cost $930 and on receipt of half that amount he would arrange the MBW but he heard nothing more from Darryl and Petra until the vehicle had broken down. Bestcars said it was up to Darryl and Petra to maintain and repair the vehicle. 


Bestcars had no record of any verbal agreement to suspend loan repayments. There was only one meeting with Darryl and Petra after the vehicle breakdown and two further loan repayments were made after that meeting. 


Under the loan contract, Darryl and Petra had to give Bestcars five working days notice in writing of their intention to change their address. Bestcars had no record of receiving either written or verbal notification of their change of address and the pre possession notice was sent to their last recorded address. Eventually, Bestcars managed to trace the vehicle through a repossession agent and the vehicle was repossessed. Bestcars believed it was entitled to repossess the vehicle and to sell it and apply the proceeds of sale to the outstanding loan balance. 


FSCL’s view 

Darryl and Petra’s version of events prior to and during the auction was at odds with Bestcars’ view. All we could do was to look at the documentary evidence. There was nothing to suggest that Bestcars did more than agree to finance the vehicle purchase. There was nothing to support Darryl and Petra’s argument that Bestcars purchased the vehicle for them or actively encouraged them to make the purchase.  It followed that Bestcars was not responsible for repairs when it broke down. Bestcars offered Darryl and Petra a MBW when they requested one but they did not follow up with the necessary payment and no MBW was applied to the loan. 


Bestcar’s file notes confirmed that when Darryl and Petra contacted it after the vehicle breakdown, Bill told them that BFL was not responsible and that they had to bear the repair and maintenance costs. There was no evidence of any agreement to suspend loan payments and we accepted Bestcars’ point that if such an arrangement had been made at the only meeting between the parties, it was odd that Darryl and Petra made two further loan repayments after the meeting. 


The pre possession notice was sent to Darryl and Petra’s last known address which satisfied the requirements of the Credit (Repossession) Act 1997. The loan was clearly in arrears when the vehicle was repossessed and we concluded that the vehicle was legally repossessed by Bestcars. Darryl and Petra were not happy with the outcome of our investigation but chose not to pursue matters any further.