The consumer’s issue:
“I purchased the car, and was advised to take out a finance agreement based on an annual mileage of 5,000 to keep the payments down. I was informed when I had paid 50% of the agreement that I could terminate at no additional cost. The contract also stated:
“If you have paid at least half the total amount payable, plus any overdue instalments, and have taken reasonable care of the goods, you will not have to pay anymore”.
I took the deal, but at 10,000 miles a year, and have now voluntarily terminated the contract. At the time of termination, I had covered some 35,000 miles more than the agreement would have suggested at this point, based on what I was told. However, the finance company is demanding payment of £2616.00 for excess mileage, even though I was specifically told there would be no charges if I exercised that right”.
The accredited business’ response:
- The consumer signed the documentation, which confirms they received the terms of the finance agreement, both verbally and in writing.
- The documentation showed the consumer received information about the excess mileage charges that would apply if the annual mileage was exceeded.
- The consumer signed to acknowledge that there was an allowance of 10,000 miles per year, and we believe shows that they intended to cover 10,000 miles per year.
- The documentation does not reflect the consumer’s assertion that they were told these charges would be waived.
- Had the consumer taken out a higher mileage allowance the total payable would have been higher per month. These charges simply reflect the additional depreciation the consumer has caused, and do not constitute penalties to the consumer. We do not therefore agree the consumer has incurred any financial loss.
The adjudication outcome:
- The adjudicator considered the arguments of both parties, and as the contract was the most reliable source of information, it was the most dependable indication of the agreement.
- Details of what was or was not said at the point of sale could not be proven to the necessary standard of proof, either for or against either party.
- The contract was therefore read by The Motor Ombudsman to understand what the consumer had agreed to
- On the first page, there were a number of statements which were the simple overview of the terms of the contract. This was followed by the formal agreement by the consumer.
- There was however, a mistake in the drafting of the statements.
- The adjudicator noted, in cases where there is ambiguity, any reading of the contract goes in favour of the party that didn’t draft it – so in this case, the consumer.
- The statement in question was that on page 1. The terms the consumer was agreeing to when they sign, were noted on pages 2 to 3.
- The terms which cover mileage deductions were found on pages 3 and 4. The specific terms about when they apply were on page 4.
- The adjudicator determined that, when applying the necessary reading of that contract, they had to balance both the logical intention of the terms, and what they literally said.
- When balancing these, it was decided that it was unreasonable to expect the consumer to hand back the vehicle with no penalty for the additional usage.
- So, looking literally at the terms led to an unreasonable outcome which The Motor Ombudsman adjudicator felt was unfair. They took the view that the Vehicle Sales Code had been breached, and upheld the case in favour of the consumer.
- However, to determine the award, a balance of the value of the vehicle at the end of the contract had to be considered.
- The adjudicator therefore looked not just at the expected future value, and how the contract calculated it, but also what the actual value of the vehicle was when the termination occurred.
- The difference between the expected value at 10,000 miles per annum and the actual value was used to calculate what the consumer should owe.
- This led to the payment for excess mileage being reduced to £1,271.60.
- The business did not agree with the outcome and requested a final decision from the ombudsman.
- After reviewing the case, the ombudsman agreed with the adjudicator’s decision that it was the correct and fair resolution of this complaint, and stood by the award of £1,271.60.