Millions of UK drivers may be entitled to compensation for hidden car finance fees—but most claims will top out at just £950.

Millions of UK motorists who took out car finance over the last 18 years could be eligible for compensation following a landmark Supreme Court ruling on hidden commissions paid by lenders to car dealers. This decision opens the door to potential payouts for customers found to have been mis-sold finance, according to BBC News.

Who Is Eligible for Compensation?

Most vehicle buyers use motor finance, borrowing money and paying in instalments over time. Dealers typically receive commissions from lenders for helping arrange these loans. While many commission payments were ruled legal, the Supreme Court found that failing to properly disclose such commissions to customers could be unfair and unlawful.

This ruling narrows the previous scope established by lower courts, focusing on whether customers were treated “fairly” in the process. The Financial Conduct Authority (FCA) is still working to clarify what “fairness” means in this context according to The Independent.

A group particularly likely to qualify includes those who took out car loans with discretionary commission arrangements (DCAs). These were banned in 2021, but before then, lenders gave dealers leeway to charge higher interest rates and receive a percentage as commission. Customers who were overcharged due to DCAs have a strong case for redress. If you have your finance contract, reviewing the terms and conditions could offer clues about whether DCAs were involved.

How Much Commission Is Considered Excessive?

In the test case that reached the Supreme Court, Marcus Johnson was awarded compensation after it was revealed 55% of the interest he paid was commission. He described being overwhelmed by paperwork and trusting the dealer’s explanations without fully reading the contract.

The court ruled that such a high commission percentage was unreasonable. While it’s not yet clear what the lower threshold for unfair commission is, anyone paying commissions at similarly high rates has a strong claim. The ruling also considered Mr Johnson’s limited financial sophistication, highlighting that many car buyers feel overwhelmed and pressured during purchase, as financial analyst Danni Hewson from AJ Bell explained.

Why The Small Print Matters

A key legal question is whether customers gave “informed consent” to pay commission. While contracts typically include details about commission, these are often buried in fine print, not highlighted, and presented under time pressure. The Supreme Court noted that key contract elements must be clearly emphasised—if not, customers may have a valid claim even if the commission was disclosed somewhere in the paperwork.

Consumer advocate Alex Neill, co-founder of Consumer Voice, points out that contracts lacking clear, prominent disclosures could render the finance deal unfair.

What To Do If You Think You’re Eligible

The FCA is setting up a compensation scheme expected to launch after a consultation starting in October, with first payments anticipated in 2026. Meanwhile, customers can write to their lenders to lodge complaints. Lenders are required to acknowledge complaints within eight weeks, which can provide early indications of whether compensation is likely.

If you don’t recall your lender’s name, the dealership should be able to help identify it. The FCA and consumer groups strongly advise against signing up with claims companies. Many advertise online, but they cannot advance claims until the FCA scheme is live and typically take a cut of any payouts.

How Much Could You Receive?

Exact compensation amounts are unclear, but payments will likely relate to how much commission was charged. The FCA estimates most claims will be under £950, assuming around 3% annual interest commissions according to Sky News. People who financed multiple vehicles over the years could be eligible for multiple payouts.

Additional Considerations: The Bigger Picture

Car finance agreements often include complex features like balloon payments that backload costs to the end of the contract, adding to confusion and potential unfairness. The court ruling and FCA’s forthcoming scheme aim to address these long-standing issues that have left many consumers feeling misled.

People Also Ask

Can I claim compensation if I bought my car more than 10 years ago?

Yes. The potential claims cover car finance agreements made up to 18 years ago, so many buyers from the last two decades may qualify if their contracts included unfair commission arrangements.

What if I sold the car and no longer have the finance documents?

You can request a copy of your finance agreement from the lender or the dealership. They are required to keep records and should be able to provide this information to help you check your eligibility.

Will filing a complaint affect my credit score?

No. Making a complaint about unfair commission or mis-sold finance does not impact your credit rating or score.

Do I need a lawyer to file a claim?

Not necessarily. When the FCA compensation scheme launches, it will provide a straightforward way for consumers to apply for redress without needing legal representation. Be cautious of claims companies that may charge fees.

Closing Thoughts: The Road Ahead for Consumers

This Supreme Court ruling and the FCA’s upcoming compensation scheme represent a significant step toward greater fairness in the UK car finance market. While the process may take time, consumers who suspect they were mis-sold finance should stay informed and prepare to seek redress. With millions potentially affected, this could be one of the most consequential consumer finance cases in recent years, shining a light on opaque practices that have cost buyers hundreds or even thousands of pounds.