Many car finance customers were mis-sold payment protection insuranceGETTY IMAGES

Car finance companies are being investigated over whether they give enough information to buyers about the risks involved. The Financial Conduct Authority (FCA) will also examine whether consumers may be harmed by the commission paid to car dealers by finance firms.

What is car finance?
Personal contract purchase is one of the most popular ways to buy a car. Buyers pay a deposit and make repayments over a fixed term, usually 12 to 36 months. They can then return the car or keep it by making a final payment based on a “guaranteed future value”, which is set at the start of the finance agreement.

Hire purchase is another alternative to a bank loan. The buyer puts down a deposit and makes a set number of…