Updated: 10 November 2025

Originally Published: 26 February 2025

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Car finance is now one of the most common ways to buy a car in the UK. Whether you chose a Personal Contract Purchase (PCP) or a Hire Purchase (HP) plan, spreading the cost has made owning a car more manageable for millions of drivers. Unfortunately, not every agreement was sold fairly. Between 2007 and 2024, many people took out car finance without realising they had been mis-sold. In some cases, they ended up paying more because of hidden commissions built into the deal. Others paid higher interest than they should have because dealer incentives were not explained clearly. In other cases, the key features of PCP, such as the balloon payment and mileage limits, were not made clear.

If you financed a car during this period, you could be owed a car finance refund. Regulators estimate that total compensation across the industry could reach £8.2 billion, and the average payment is currently expected to be around £700 per eligible agreement [1]. The actual figure for any person will depend on the size of the loan, the commission involved, the length of the agreement, and how your interest rate was set.

This guide walks you through how to claim mis-sold car finance, what evidence to gather, and what to expect from the FCA redress process in 2025 and 2026. You will also find plain language tips and links to supporting topics from our Car Finance Claims Cluster Series, so you can move from uncertainty to action with confidence.

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What Is a Car Finance Claim?

A car finance claim is a formal complaint about how your car was financed. If you think the deal was not explained fairly, or if you later learn that a dealer or broker received a commission that influenced your interest rate and was not told, you can file a complaint with your lender.

When a car finance claim succeeds, common outcomes include:

• Refunds of overpaid interest that resulted from hidden or excessive commissions.
• Repayment of undisclosed broker or dealer commissions.
• Adjustments to your remaining balance if the agreement is still running.
• Compensation for distress and inconvenience in serious cases.
• Corrections to your credit file where unfair markers were recorded.

The Car Finance Scandal: How It Started

The current car finance scandal centres on how commissions worked behind the scenes. Starting around 2007, many dealerships used Discretionary Commission Arrangements, often shortened to DCAs. In a DCA, the lender set a rate band and gave the dealer room to move the rate within that band. The higher the rate set for the customer, the larger the dealer’s commission. Most drivers were never told any of this. Many assumed the rate was based purely on credit score and affordability.

As these practices became widespread, the impact grew across millions of PCP and HP agreements. The FCA banned DCAs for new loans in January 2021 [2]. Older agreements remain under review, and the regulator has designed a process so that cases can be handled consistently.

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Key Milestones

April 2007: The FCA's coverage period for eligible car finance complaints begins.

January 2021: For all new finance agreements, discretionary commission arrangements were banned.

2024: Court of Appeal rulings against several big lenders raised national attention to how commission arrangements were managed.

2025: Supreme Court clarified key legal points regarding commission and disclosure [3], stating that consumers can still sue if secrecy and financial impact are proven.

2026: It is expected that the FCA will publish its final redress rules, setting out standards for lenders to make just and consistent decisions and for customers to receive any compensation they are due.

If your finance was arranged between 2007 and 2024, and you were not told the full story about commissions or lender choice, you may be due a car finance refund.

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The Three Types of Unfair Car Finance Agreements

As part of its 2025 consultation, the FCA identified three categories that help determine when an agreement is unfair.

1) Discretionary Commission Arrangements

These are at the heart of many car finance claims. The dealer could influence your interest rate and earn more for setting a higher rate. Customers were rarely told this. If your rate was set inside a band and no one explained how that worked, your case may involve a DCA and could be eligible for redress.

2) High or Hidden Commissions

Some agreements included commissions that were unusually large or were not properly disclosed. The FCA views this as unfair where commission makes up a substantial part of the cost. A rough guide that is often quoted is 35 percent or more of the total cost of credit, or 10 percent or more of the loan amount. If you were only told that “a commission may be paid” with no detail about how it could affect the rate, your agreement may fall into this category.

3) Restricted Lender Access

Many dealers offered finance only from a single provider, usually the manufacturer’s own finance arm. Without a genuine comparison, customers were left thinking they had the best rate when cheaper options might have existed elsewhere. If you were never offered a fair choice, this can contribute to an unfair relationship.

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How to Tell If You Were Mis-Sold Car Finance

You might not know immediately that something was wrong. Many people only feel that a deal was off when they look back at the monthly cost, the APR, or the final balloon payment.

Strong warning signs include:

• No clear mention that a dealer or broker would be paid commission for arranging the loan.
• An interest rate that felt high for your credit score with no sensible explanation.
• Pressure to decide on the same day without time to compare.
• Only one finance option presented as a take-it-or-leave-it choice.
• PCP features, such as the balloon payment and mileage limits, skimmed over or not explained.
• If any of these ring true, you may have grounds to claim mis-sold car finance. If you want more help checking, see our cluster article Am I Eligible to Claim on My Car Finance Agreement?

How to Claim Mis-Sold Car Finance

This is the practical bit. Here is how to claim mis-sold car finance in five clear steps.

Step 1. Gather Your Information

You do not need a perfect folder before you start, but the more you can provide, the smoother the process. Begin with:

• Your finance agreement if you have it.
• Emails or letters from the dealer or lender.
• Bank statements that show repayments.
• The car registration, the dealer name, and the approximate start date.

If you cannot find your paperwork, do not worry. You can trace details by:

• Checking your credit report with Experian, Equifax, or TransUnion.
• Searching your email for “finance agreement”, “PCP”, “HP”, or the car model.
• Asking the dealer which lender they used at the time.
• Requesting copies directly from the lender, who must keep records.

For more practical steps, see Tips for Gathering Evidence for Your Car Finance Complaint.

Step 2. Write and Submit Your Complaint

Your complaint should be short, factual, and clear. Explain why you believe the deal was unfair. Include your full name, address history, car registration, agreement number if known, the dealer name, and the date you signed.

You can do this yourself, or you can ask a regulated PCP claims company to prepare and submit the complaint on your behalf. A light mention here is helpful. Reclaim247 is an FCA-authorised option that can check eligibility, retrieve missing agreements, and manage communication with lenders. We mention them because many people prefer a guided process. Choose any regulated firm you trust.

Step 3. Understand the Current Timelines

Under normal rules, lenders must respond within eight weeks. Because of the national review of commission practices, there is a temporary pause on final responses for these cases. The current picture is:

• Pause on final responses for commission cases until 4 December 2025 [4].
• Proposed deadline for lenders to issue final responses: 31 July 2026.
• Payments expected to begin from late 2026 once rules are finalised.

You can still submit now. In fact, doing so is sensible. Your case will be logged and will enter the queue. When the schemes and final guidance are issued, your complaint will already be ready for assessment.

For a plain walkthrough of what happens after submission, see What Happens After Filing a Mis-Sold Car Finance Claim?

Step 4. Escalate to the Financial Ombudsman Service if Needed

If your lender rejects the complaint or you are unhappy with the offer, you can go to the Financial Ombudsman Service. The Ombudsman will look at your case independently and can instruct the lender to pay compensation where the evidence supports it. Keep your submission organised and within the normal referral window that follows a final response.

If you think this stage might apply to you, read How to Use Ombudsman Services Effectively for Disputes in our cluster series.

Step 5. Receive Your Refund or Compensation

Successful outcomes can include:

• Refund of overpaid interest that resulted from hidden or excessive commissions.
• Refund of any undisclosed dealer or broker commissions.
• Adjustments to an active balance where needed.
• Simple interest on refunded sums.
• Credit file corrections for unfair markers.

Want a quick estimate before you start? Many people use a car finance refund checker to get a rough idea. Treat any estimate as a guide, not a guarantee, because your figures will depend on your own paperwork and what the investigation shows.

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How Much Compensation Could You Receive?

There is no single number that fits every case. The FCA currently expects average payments of around £700 per agreement across the industry. Your amount may be higher or lower based on:

• The size and term of your loan.
• The commission paid and whether it influenced the rate.
• Whether the dealer had discretion to set your rate within a band.
• Whether add-ons or fees were included without clear consent.

If you financed several vehicles over the years, the total can add up. If you prefer a quick sense check before you write your complaint, a car finance refund checker is a useful starting tool.

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Common Mistakes to Avoid

Even strong claims can be slowed down by small errors. Avoid these common pitfalls:

• Missing evidence. Include any agreement, email, or bank statement that supports your position.
• Vague wording. Be specific about what was not explained and why it mattered.
• Silence after submission. Always confirm your complaint was received and keep a record.
• Deadline drift. Note key dates so you can escalate on time.
• For a full list and quick fixes, see Common Errors to Avoid When Filing a Car Finance Claim from our cluster series.

Tips for Strengthening Your Case

A tidy, well-evidenced complaint is faster to review and more persuasive. Here is how to make your case easier to assess:

• Put documents in chronological order and use short labels.
• Write a timeline of the sale in simple language.
• Highlight where the commission or the balloon payment was not explained.
• Keep your tone calm and factual.

If you are missing items, ask the lender for copies. They are required to keep records.

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What Happens After You File

Once your complaint is submitted:

• The lender will acknowledge it.
• Your case will be logged for assessment when the pause lifts.
• You may receive a holding update during the pause.
• After the FCA issues final rules, the lender will issue a decision and, if upheld, pay your refund.

If you disagree with the outcome, you can take it to the Financial Ombudsman Service for an independent decision.

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How the Ombudsman Can Help

The Financial Ombudsman Service is an independent body that settles disputes between consumers and financial firms. The Ombudsman can:

• Reassess your case from scratch.
• Ask the lender for internal notes or data you do not have.
• Issue a legally binding decision.

You usually need to contact the Ombudsman within six months of receiving your lender’s final response.

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How to Appeal a Rejected Claim

A rejection is not the end. If your claim is refused or the offer feels too low:

• Read the rejection letter carefully and list the reasons given.
• Provide new evidence or clearer explanations that answer those points.
• Escalate to the Ombudsman if the lender maintains the position.
• Consider professional support if you want help shaping the appeal.

Our guide How to Appeal a Rejected Car Finance Claim includes template language you can adapt and a checklist for each stage.

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Your Questions Answered

Is this only for PCP deals?

No. HP agreements can also be affected. That said, PCP claims are common because commissions and balloon terms often created confusion. If you used PCP, you are not alone and you do not need to still own the car to claim.

Can I still claim if my finance ended years ago?

Yes. Agreements going back to April 2007 are within the review window. If you no longer have the car or you settled early, you can still raise a complaint.

What if I do not remember who the lender was?

You can trace it. Check your credit report, your emails, and bank statements. If you need help, a finance claims expert can run a trace using your details.

Will complaining hurt my credit score?

No. Making a complaint does not harm your score. If your claim is upheld, unfair markers linked to the agreement can be removed.

Can I handle this myself?

Yes. Many people do, and this guide exists to help you do it well. If you prefer support, a PCP claims company can do the heavy lifting.

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How Reclaim247 Can Help

You can raise a PCP claim or an HP complaint yourself, or you can use a regulated representative. If you prefer a guided option, Reclaim247 is one example of an FCA-authorised service that can:

• Run a free eligibility check.
• Retrieve missing agreements and statements.
• Prepare and submit your complaint to the lender.
• Chase responses and challenge low offers where appropriate.

We mention Reclaim247 briefly so you know that help is available. You’re free to choose any regulated firm you feel comfortable with. If you’re comparing options and want to find the best PCP claims company for your situation, look for firms that are properly authorised, transparent about their fees, easy to communicate with, and well reviewed by people with similar experiences.

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What You Should Do Now

Even though the pause on final responses runs through 4 December 2025, making a complaint puts you in a stronger position.

Acting early helps you:

• Place yourself in the review queue.
• Preserve evidence - emails and system records are easier to get.
• Protect eligibility, should cut-offs or referral windows tighten once the final scheme goes live.

If you are not ready to write a full complaint today, start with an eligibility check or a car finance refund checker to get a sense of your position. The main thing is to begin.

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FCA Redress Timeline for 2025 to 2026

October to December 2025: FCA consultation on the national redress framework [5].

4 December 2025: Pause on final responses expected to end.

Early 2026: Final rules issued and scheme guidance published.

31 July 2026: Proposed deadline for lenders to provide final responses.

Late 2026: Compensation payments expected to begin.

These dates help you plan. The sooner your complaint is in the system, the sooner it can be reviewed when processing starts.

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Related Guides in Our Cluster Series

To keep this guide readable, we moved deep-dive topics into short, focused articles. Explore these next:

Am I Eligible to Claim on My Car Finance Agreement?

A simple checklist you can complete in minutes.

Common Errors to Avoid When Filing a Car Finance Claim

Time-saving fixes that prevent delays and rework.

Tips for Gathering Evidence for Your Car Finance Complaint

What to collect, how to organise it, and how to present it clearly.

What Happens After Filing a Mis-Sold Car Finance Claim?

A simple guide to acknowledgements, holding notes, and final responses.

How to Use Ombudsman Services Effectively for Disputes

How to prepare a strong file and what to expect from the process.

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How to Appeal a Rejected Car Finance Claim

Template wording to strengthen your position and common gaps to fix.

This guide is designed to be quick to read and easy to action.

Use these starter lines to reduce friction.

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Subject line:

Car Finance Complaint – [Your Name], [Registration], [Agreement Number if known]

Opening paragraph:

I’m writing to raise a complaint about how my car finance agreement was sold. I wasn’t told that the dealer or broker could change the interest rate in a way that increased their commission. I’d like you to review my agreement in full and provide a refund for any extra interest or undisclosed commission I may have paid.

Evidence list:

I’ve attached copies of my finance agreement, emails with the dealer, bank statements showing repayments, and a short summary of what was discussed when the finance was arranged.

Closing line:

Please confirm you’ve received this message and let me know if you need any further information to review my complaint. I look forward to your response.

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These keep your message calm, factual, and easy to process.

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The Bigger Picture

The car finance claims story is not only about money. It is about trust between customers and firms. For too long, people were kept in the dark about how their APR was set and whether the salesperson had an incentive to raise it. The redress scheme aims to repair that. By claiming, you are asking for fairness in your own case and helping to raise the standard for everyone who finances a car in future.

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Conclusion: Take Control of Your Claim

If you financed a vehicle between 2007 and 2024, now is the right time to check your position. You do not need perfect paperwork to begin. You can start with what you have, use a car finance refund checker to get a rough estimate, and then submit your complaint. If you prefer not to manage the process alone, a regulated finance claims expert or a PCP claims company such as Reclaim247 can guide you.

This guide has shown how to claim mis-sold car finance, what evidence helps, when to escalate, and how to appeal. It has also set out the FCA timelines so you can plan. The key is to act. Once your complaint is logged, you are in the queue and ready for assessment when the scheme opens. That is how to claim car finance back with confidence.

You deserve explanations, fair costs and honest disclosure. Take the first step today towards a car finance refund you may be due.

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References:

1. Regulators estimate that total compensation across the industry could reach £8.2 billion, and the average payment is currently expected to be around £700 per eligible agreement - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
2. The FCA banned DCAs for new loans in January 2021 - https://www.fca.org.uk/publication/consultation/cp24-15.pdf
3. Supreme Court clarified key legal points regarding commission and disclosure - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
4. The FCA implemented a pause on final responses for commission cases until 4 December 2025 - https://www.fca.org.uk/news/statements/firms-given-until-december-2025-respond-motor-finance-commission-complaints
5. FCA consultation on the national redress framework - https://www.fca.org.uk/news/statements/fca-consults-motor-finance-compensation-scheme