Millions of UK drivers may be owed car finance compensation – here’s how to check if you were affected (aff)

A major investigation into the way car finance was sold by car dealerships has found that millions of drivers were overcharged - and they could now be entitled to compensation.

Dealers across the UK arranged finance deals for customers buying vehicles on hire purchase or personal contract purchase agreements, and regulators have discovered that, in some cases, the sales staff were able to increase the interest rate offered to customers in order to earn higher commission from lenders.

The practice, known as discretionary commission arrangements, was banned by the Financial Conduct Authority in 2021 after concerns it could lead to drivers paying more than they should for their finance agreements.

And now the issue has become the focus of a major consumer finance investigation, with millions of agreements potentially affected.

Experts say many drivers may not even realise their deal included this type of commission structure because, unlike some financial products where charges are clearly broken down, car finance agreements were often arranged quickly in dealership showrooms.

Regulators are concerned that customers frequently focused on the monthly payment rather than the interest rate behind it and, if a dealer increased the interest rate to boost their commission, it could mean drivers ended up paying hundreds – or even thousands – of pounds more than they should have done over the course of the agreement.

Consumer groups say the issue could affect a significant number of drivers who financed vehicles between 2007 and 2021. It's during this period that car finance became one of the most common ways to buy a vehicle in the UK.

Many drivers simply signed the paperwork presented to them, often unaware that the interest rate could be adjusted by the dealer.

In some cases the commission arrangement was not clearly explained, raising questions about whether customers were treated fairly.

Because of this, regulators have been examining whether drivers were mis-sold finance agreements and whether compensation may be due.

The investigation is ongoing, but consumer law specialists say drivers who financed vehicles during that period may want to review their agreements to see if they could have been affected.

Agreements most likely to fall within the investigation include hire purchase (HP) and personal contract purchase (PCP) deals arranged through a dealership between 2007 and January 2021.

Drivers who took finance directly from a bank or arranged it independently are less likely to have been affected.

One of the difficulties for consumers is that many people no longer have the paperwork from agreements taken out years ago – particularly if they have since changed vehicles several times.

However, experts say you may still be able to check whether your finance agreement could qualify even if you no longer have the original documents.

Law firms specialising in financial claims say a simple eligibility check can often confirm whether a driver’s agreement may have involved discretionary commission.

For drivers who financed several cars over the years, it is also possible that more than one agreement could qualify.

Check your car finance agreement here to see if you could claim compensation.

While the final outcome of the investigation is still developing, the scale of the issue has already drawn widespread attention across the consumer finance sector.

For drivers who used dealer-arranged finance before 2021, reviewing past agreements could be an important step in understanding whether they paid more than they should have.

And because many people changed cars multiple times over the years, experts say it may be worth checking every finance agreement you had during that period – not just the most recent one.

Check your car finance agreement here to see if you could claim compensation.