Partially upheld: Motor insurance, claim handling complaint against Mercedes-Benz Financial Services UK Limited

Decision detail

Summary

Mr I leased a used car through MBFS and was charged £2,622 for damage to three alloy wheels upon return. MBFS calculated this charge based on full replacement cost with new items. The ombudsman found that while the damage exceeded fair wear and tear guidelines, charging new-for-old replacement costs without accounting for the vehicle's age and mileage was unfair and constituted betterment. Applying a 30% depreciation factor to reflect the residual value of wheels on an eight-year-old, 112,000-mile vehicle, the ombudsman reduced the charge to £786, upholding the complaint in part.

The Ombudsman's reasoning

The ombudsman found that while damage beyond fair wear and tear could be charged, the calculation method was unfair. MBFS charged based on new replacement cost without accounting for the vehicle's age (eight years) and mileage (112,000 miles). This approach risked placing the business in a better position than if the agreement had been performed without breach (betterment). The ombudsman applied a 30% depreciation factor to reflect the residual value of alloy wheels on such a vehicle, resulting in a fair compensatory charge of £786 rather than £2,622.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website