A recent Scottish court case involved whether any deduction in sums to be returned to customers should be made for use of a car where the car is ultimately rejected by the customer. Debbie Brogan, Legal Director in our Litigation & Dispute team and an accredited Debt and Asset Recovery specialist, discusses the court’s decision in that case (Annas El-Kihel v Santander Consumer Finance [2026] SC GLA 16) which will be of interest to finance companies dealing with rejection of an asset following a period of use.
The facts
The customer, Annas El-Kihel, entered into an agreement with Santander Consumer Finance ("Santander") in 2021 for the supply of a used car. The customer took delivery of the car in June 2021. Prior to the agreement, the car had been involved in a road accident in which the driver's side airbag had been deployed. The airbag was not replaced and instead a resistor was inserted into the car's electrical circuitry. The car therefore did not have a functioning driver's side airbag when it was delivered to the customer.
The customer had concerns about the safety of the car shortly after taking delivery, though it could be driven and was roadworthy. The car passed an MOT test in March 2022. In June 2022, the customer contacted the dealership they had purchased the car from complaining about the condition of the car. By that time the customer was aware that the driver's airbag had not been replaced following the earlier accident.
The customer refused an offer from Santander to repair the car and instead rejected the car on 11 July 2022, over one year after taking delivery. On 26 September 2022, Santander accepted the customer's rejection of the car and the car was collected. The car had been driven for approximately 9,572 miles between the date it was delivered to the customer and the date it was collected.
In terms of the agreement, the customer paid Santander £15,650.40 between delivery of the car and collection. Following rejection, Santander repaid the customer £10,550.40, being payment of everything the customer had paid in terms of the agreement less the sum of £5,100 as a deduction for the customer's use of the car. Santander calculated the deduction by applying a daily rate of £15 for 340 days' use of the car. Santander also paid the customer the sum of £1,636.18 as general compensation for inconvenience, the cost of an expert report and a contribution towards repair costs for the car.
The customer was not happy about this deduction and thought he was due more compensation so raised court action against Santander. For the purposes of this article, the court had to consider:
- whether Santander was entitled to deduct anything from the settlement sum in relation to the customer's use of the car and if so what the amount of deduction should be; and
- what, if any, sum should be awarded in terms of inconvenience.
An evidential hearing took place. Both parties referred to the Consumer Rights Act 2015 ("the 2015 Act"), particularly sections 24(8) and 58(5), which provide that where the consumer exercises the final right to reject, any refund to the consumer may be reduced by a deduction for use to take account of the use the customer has had of the goods in the period since they were delivered. In terms of the 2015 Act, the court has discretion to allow a reduction to the refund to take into account the use of the car.
The customer's primary position was that there should be no deduction of the sum paid in relation to use of the car because they only had full use of the car for three months from the date of delivery. If any deduction was to be made, they said the deduction made by Santander was excessive and should be reduced. Santander's position was that the deduction was adequate and fair in the circumstances and should not be reduced.
The decision
The interesting part of the decision for finance companies is in connection with the issue of a deduction for use. Prior to this decision, there was no reported Scottish decision on the issue of deduction for use where the final right to reject is exercised, albeit a recent decision of the Inner House of the Court of Session did consider the applicability of section 24(8) of the 2015 Act and confirmed that a consumer may use goods after exercising their final right to reject and any continued use may be reflected by a deduction to the refund to the consumer provided the deduction is "justified by the whole circumstances".
In considering the claim for deduction for use, with reference to the statutory provisions and case law, the court in the current case confirmed:
- whether to allow a discount for use of a vehicle is a matter for the discretion of the court;
- the court should exercise its discretion in light of the whole circumstances of the case;
- in determining how to calculate any deduction for use, reference should be had to the daily rate payable for the vehicle per the terms of the agreement for the supply of the vehicle;
- any deduction should reflect the benefit the consumer has enjoyed from the use of the vehicle.
Deduction for use in this specific case
Consideration of the whole circumstances of the case included reviewing the condition of the car and the impact the previous accident and the missing driver's side airbag had on that, as well as the quality of the repairs carried out to the car after the accident. Experts instructed for both parties gave substantial evidence in relation to the condition of the car though neither expert had inspected the car. Taking into account all of the evidence from the parties' experts, the court determined that the car was "less safe to drive as a result of the missing driver's curtain airbag" and that there was insufficient evidence to establish that poor quality repairs affected the car's safety.
The court also considered the quality of the customer's use of the car and the mileage incurred as a result of that use between the delivery date and the date the car was collected by Santander. The customer's evidence in relation to their use of the car was tested by the court, particularly their evidence that the car was so unsafe that they were exposed to extreme injury or death if they continued to use the car when in fact they did continue to use it, albeit slightly less than when they first took delivery. The court was not persuaded that the absence of the airbag or the general condition of the car had significantly affected the customer's use of the car.
The court was persuaded by Santander's approach to calculating an amount to be deducted for use of the car. Santander used the daily rate provided by the conditional sale agreement of £22.92 though reduced that to £15 to take into account the issue with the missing airbag. Santander based their calculation on a period of 340 days, being the period from delivery of the car to collection minus the days the customer had no use of the car when the car was being inspected or repaired. Santander calculated that £5,100 should be deducted from the sum due to be paid to the customer.
Taking into account the circumstances of the case, the court considered that the daily rate should be reduced further than £15 and decided that a reduction of 50% to £7.50 of the daily rate was fair. The court considered that Santander's calculation of 340 days of use of the car by the customer was reasonable. Accordingly, the court decided that a reasonable amount to allow for the customer's usage of the car was £3,896.40. This meant a balancing payment of £1,203.60 (i.e. £5,100 - £3,896.40) was due from Santander to the customer. The court ordered payment of that sum by Santander to the customer.
Finally, the court considered that the £500 Santander had paid to the customer in relation to the customer's claim for inconvenience was adequate. The customer had failed to provide any detail as to any costs they had incurred as a result of the issues with the car or any precise timeframe when they were inconvenienced by having to use another car.
This decision provides authority in Scotland that a deduction for use of a car which is ultimately rejected by a customer may be applied to sums to be refunded though it makes clear the amount of deduction will be calculated based on an analysis of the full circumstances of the case.
