Car finance: damage and fair wear and tear

Return your car at the end of a finance contract and a little wear and tear is expected. But how much is acceptable? Find out below

John Evans
Oct 6, 2021

Thinking about taking out PCP finance or a lease for your next car? In the excitement of getting a new car, some of the small print and finer details can be forgotten. Or you might feel that the end of the contract you’re signing up for is so far away, so it’s something for future you to think about. But one aspect that you need to bear in mind is “fair wear and tear” and the condition that the car is in when you return it, as it could cost you a lot of money. BuyaCar has you covered on everything car finance related, so keep reading to get your head around the ins and outs of fair wear and tear.

When purchasing a car on finance, you agree to keep the vehicle in good condition throughout the term of the contract - because with PCH leasing the car is never yours and with PCP you don't own it unless you make the optional final payment to buy it. Since the finance company owns the car, therefore, if you return the car covered in dents and scrapes, you can expect to be handed a hefty bill to fix the damage. Car finance companies expect the car to come back in a condition in line with its age and mileage and will accept any damage deemed to be fair wear and tear.

Fair wear and tear covers what the lender considers to be an acceptable level of wear. If the car is considered to be worn beyond that accepted level, you can expect a bill for the cost of rectifying any excessive wear. What's acceptable varies with the age and mileage of the vehicle, but the finance company is looking to ensure the car is in a suitable condition to be sold on.

If your car is stolen or written off, your insurance company will pay out the current value of the car. But in many cases you’ll owe more than the car is worth, so you’ll need to pay the finance company to settle the outstanding debt - even if you don’t have a car to show for it. Selecting to add gap insurance when you take out your PCP contract gets rid of this; check out our guide to gap insurance for more information.

What is fair wear and tear?

Finance companies understand that a car that has been used for several years and has a few thousand miles on the clock won’t be in exactly the same condition as when it left the factory. Instead, they accept that in daily use a vehicle will suffer what they call ‘fair wear and tear’.

Generally speaking, this means a few light scratches and stone chips on the body, windows, and plastic wheel trims, and even a couple of minor dents here and there. However, it does not include damage such as serious dents, a cracked headlight, poor paint repairs, cracked trim and torn seats. To get an idea of what you might be charged for, stand a few paces back from the car and see what imperfections you can see.

Read on for a detailed explanation of what does and does not constitute fair wear and tear below.

Why does fair wear and tear matter?

When you sign a PCP contract, your monthly payments are affected by what the finance company predicts the vehicle will be worth at the end of the agreement. That means that if you sign up for a high-mileage contract, the difference between the car's price new and its expected value at the end of the contract is greater, a high-mileage car will be worth less when the contract ends - increasing your monthly payments.

Similarly, if you return the car with large dents on every panel, scraped alloy wheels and torn seat fabric, the car will be worth less than expected - and the finance company will expect compensation for this. Finance quotes are based on the assumption the car will be returned in good condition with only minor - or fair - wear and tear, but if it isn’t, you will be charged for the cost of returning that car to that condition.

Should I be worried?

As long as you are aware of the expectations of your finance company, and you are careful with the car, there really is no need to get concerned about wear and tear. 

It's important to remember that you are not the owner of the car with a lease, or with PCP unless you've completed all the monthly payments and choose to make the optional final payment, so we suggest driving the car in the same way you would drive your dad's car: carefully.

Of course, turning a blind eye to casual scrapes or even more serious damage will not end well, and we recommend you strive to take as much care of the car as you can to be on the safe side. Basically, treat it as if it is your own. But simply using the car for your day-to-day activities, with it picking up the occasional small stone chip or car park door ding should not lead to additional charges.

How and when are charges applied?

Damage charges are issued at the end of the contract if you decide to return the car to the finance company, as you do with a lease or PCP finance, where you choose not to buy the car outright.

At this point, you arrange to have the car inspected by the finance company that will record anything considered more substantial than fair wear and tear. Within four weeks you'll be notified what (if any) rectification work is required and how much you will be charged.

However, you can also face rectification charges indirectly when you part-exchange the vehicle. In this situation, the dealer offers to settle the outstanding balance with the finance company to clear the remaining debt and purchase the car outright.

If, due to its poor condition, the car is worth less than the finance company wants for it, you'll be asked for a top-up payment to cover its refurbishment before accepting it in part-exchange and paying off the finance company.

How can I avoid charges?

The best way to avoid being charged is to take care of your vehicle. If the car is handed back to the finance company in an acceptable condition, you'll be able to walk away without having to pay a penny more.

Where the car has picked up damage - whether these are substantial scrapes on bumpers from clumsy parking or large scuffs on the wheels - you may want to get quotes for putting these right. In this scenario, you can contact the finance company to understand what they'd charge for rectifying certain types of damage and then you can see whether it'll cost you less to address any issues before the car is collected or simply pay any charges from the finance company. 

What is acceptable wear and tear?


✔ Small paint chips providing they aren’t rusting; small dents providing the paint is not broken; light scratches that can be polished out; small scuffs and scratches on unpainted trim and wheel trims.

Rust or evidence of poor paint and body repairs; large dents and deep scratches; marks left by stickers; broken unpainted trims.

Where fitted, a towing bracket should have been approved by the finance or leasing company and be in good condition with a tow ball cover in place. Convertible hoods should be free of damage. Vehicle underside and catalytic converters should be free of damage.

Windows and glass

✔ Chips as long as they have been professionally repaired, light scratching outside the driver’s field of view; replacement windscreen and headlights as long as, where fitted, the car’s 'ADAS' system - cameras and sensors that may be mounted behind the system and form part of the car's crash avoidance safety kit - has been recalibrated.

✘ Scratches and chips within the driver’s line of vision; damaged or cracked mirror and lights lenses; broken heated and adjustable mirrors; non-functioning heated screen.

Wheels and tyres

✔ Tyres that are to car maker’s specification with tread depth that meets legal requirements; light scratching and scuffing of wheel trims.

✘ Corroded or damaged alloy wheels; dented wheel trims or wheel rims; used tyre inflation canister; incomplete or missing spare wheel and tools (where fitted to begin with).

Mechanical condition

✔ Car in a safe, legal and reliable condition that could pass an MOT test.

✘ Warning lights showing; grooved brake discs; faulty engine and gearbox.


✔ Light scratches and marks on treads, sills and seals.

✘ Holes, burns and tears on seats, trim and carpets; missing parcel shelf load cover, adjustable boot floor; nets and restraining straps; faulty media systems and missing SD cards.


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