Updated: 24 September 2025

Originally Published: 05 December 2024

Car finance has changed how people in the UK buy cars. Spreading the cost has helped millions get on the road without saving for years. For others, it has created headaches that did not show up until much later. Many drivers are now discovering they may have been caught up in mis-sold car finance. They signed contracts that led to inflated repayments, hidden charges, or commissions that were never explained properly.

The ongoing car finance scandal has revealed how some lenders and dealers put profit before fairness. Through discretionary commission arrangements, dealers could increase your interest rate and earn a bigger commission, while you paid more each month. With regulators and courts still investigating, more people are bringing car finance claims to try to recover money that should never have been taken in the first place.

This guide explains the most common car finance issues, summarises the big developments in 2025, and sets out practical steps if you are considering a car PCP claim or want to use a PCP claim check to see if you could be due car loan compensation.

Why Car Finance Issues Are Growing

For fifteen years now, one of the most common ways to fund a car has been Personal Contract Purchase (PCP) and Hire Purchase (HP). These deals were sometimes marketed as flexible and affordable, yet many included risks that were not immediately apparent.

• Dealer discretionary commission arrangements: A higher interest rate gives the dealer more commission.
• Hidden costs and balloon payments: Admin fees, early settlement penalties and large final payments often came as a surprise because they were not explained clearly.
• Weak affordability checks: Some people were put into agreements they could not comfortably afford, with little assessment of their finances.
• Lack of transparency: Contracts were full of jargon, so many drivers signed without fully understanding what they were agreeing to.

This mix has driven up the number of car finance claims, as drivers look for car loan compensation and a fair outcome.

The Car Loan Commission Scandal

This latest car loan commission scandal represents one of the biggest mis-selling problems since PPI. In the first half of 2024, the Financial Ombudsman Service received more than 133,000 complaints [1], which was  40 percent more than in the same period in 2023, and more than 50,000 were about motor finance. By 2025 the pressure had increased again. Borrowers described unclear terms and undisclosed commissions, while claims management companies and law firms began filing cases. That has driven regulators to create a fair and consistent way to settle complaints.

Key Developments in 2025

Three updates in 2025 are shaping how car finance claims will be handled.

Supreme Court ruling in August 2025

The Court confirmed that commission is not automatically unlawful [2]. If, however, it was hidden or set at a level that creates an unfair relationship, it can still be challenged. That keeps many mis-sold car finance complaints alive, especially those involving discretionary commission.

FCA complaint pause

The Financial Conduct Authority has extended its pause on commission-related complaints until 4 December 2025 [3]. You can still submit a car PCP claim today but most cases won't be reviewed until after that date. The pause gives the regulator time to set a consistent approach across the industry.

Redress scheme consultation

The FCA will begin a six-week consultation to create a national compensation program in October 2025 [4]. The final rules are expected in early 2026, followed by compensation payments later in the year. This will set out how car loan compensation is calculated and who qualifies.

Common Car Finance Issues Faced by Consumers

Mis-sold agreements

Many people were not told about commissions, balloon payments, mileage limits or the true total cost. The majority of complaints about mis-sold car loans centre on these gaps.

Vehicle quality problems

Some financed vehicles turned out to be faulty or not as described, leaving borrowers with repair costs that should have been covered.

Hidden fees

Borrowers report admin charges, early repayment penalties and other costs that were never mentioned upfront.

Pressure selling

A number of drivers felt rushed, or steered into more expensive products without a fair comparison of alternatives.

Low uphold rates

Only around 29 percent of motor finance complaints have been upheld by the Ombudsman so far. That shows how important it is to gather strong evidence and why clarity from the FCA’s scheme matters.

Am I Eligible for a Car Finance Claim?

You may have grounds for a car finance claim if any of the following ring true:

• You were not told about commissions paid to the dealer or broker.
• Your interest rate was higher than it needed to be because of discretionary commission.
• The contract terms were unclear or misleading.
• You were charged hidden fees or penalties.
• You were pressured to sign without being offered fair alternatives.

A PCP claim check is a quick way to understand your position. Many solicitors and claims firms provide free reviews to assess whether you could be due car loan compensation.

How Much Car Loan Compensation Could You Get?

The FCA said the average payout per agreement for commission-related cases is about £950 [5]. Your outcome depends on:

• The size of the loan.
• The length of the agreement is discussed.
• The level of commission or hidden costs involved.
• Whether you were financially hard-pressed.

Compensation may include refund of overpaid interest, repayment of hidden commissions and refunds of unfair fees. Where conduct was particularly poor, there may be an additional amount of stress or inconvenience.

How to Make a Car PCP Claim

Making a car PCP claim is straightforward if you take it step by step.

• Check your documents. Look for signs of hidden commissions, inflated interest or unclear fees. If you cannot find your agreement, ask your lender for a copy.
• Write your complaint. Explain why you believe the agreement was mis-sold and include evidence such as contracts, emails and payment records.
• Wait for a reply. Lenders normally have up to eight weeks to respond but this may be delayed with the current FCA pause in effect.
• Escalate if needed. If the lender rejects your complaint or does not respond, you can go to the Financial Ombudsman Service.
• You can do this yourself. Many people choose a regulated claims management company or a solicitor because they can manage the paperwork, challenge a poor offer and keep everything moving.

The Role of Finance Claims Experts in Car Finance Claims

The process can feel daunting when you are busy. A claims specialist can help by retrieving missing paperwork, spotting multiple issues in one case, negotiating with lenders and keeping to deadlines. Specialist firms like Reclaim247 have already helped submit more than 400,000 car finance claims in the UK, which shows how widespread the problem has become. Many work on a no win, no fee basis, so you only pay if your claim succeeds.

Frequently Asked Questions

Can I claim if my car finance agreement has already ended?

Yes. You can still bring a mis-sold car finance claim if the loan is repaid or the car has been sold.

Do these rules apply to HP as well as PCP?

Yes. Both PCP and Hire Purchase agreements are included in the investigation and the planned redress scheme.

Do I need all my paperwork to start?

No. Lenders can provide copies and many claims companies will help retrieve missing documents.

How long do claims take?

Lenders usually have eight weeks to respond. But because of the FCA pause, most commission-related cases will not progress until after 4 December 2025.

How much does expert help cost?

Most regulated claims firms charge a success fee of around 36 percent of any compensation, including VAT. Solicitors may charge similar percentages or fixed fees.

What if my lender rejects my complaint?

You can escalate to the Financial Ombudsman Service, which can order the lender to pay compensation if it agrees the agreement was mis-sold.

Will all mis-sold car finance claims be covered by the FCA scheme?

The October 2025 consultation will set the scope. It is expected to focus on commission-related mis-selling in agreements between 2007 and January 2021.

What is a PCP claim check and is it worth doing?

A PCP claim check is a quick review of your agreement to see if mis-selling signs are present. It is a simple way to understand whether a car PCP claim is likely to succeed before you commit time and effort.

Can I make a claim myself without a company?

Yes. Many people write to the lender and then the Ombudsman if needed. If time is tight or the paperwork feels heavy, expert help can reduce stress and improve the quality of your claim.

Final Word

The car loan commission scandal has shown how widespread mis-sold car finance has been. Hidden commissions, inflated interest rates and pressure selling left many drivers out of pocket. Regulators are preparing a national redress scheme to fix that.

If you think you were affected, start with a PCP claim check and gather your documents. The FCA pause means most complaints will not be reviewed until after December 2025, but submitting your complaint now gets you in the queue for car loan compensation once payments begin in 2026. Whether you go it alone, work with a solicitor or use a claims management company, the key is to know your rights and take action. The route to a fair refund is becoming clearer for UK consumers.

_________

References:

1. In the first half of 2024, the Financial Ombudsman Service received more than 133,000 complaints - https://www.financial-ombudsman.org.uk/news/complaints-jump-40-year-year
2. The Court confirmed that commission is not automatically unlawful - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
3. The Financial Conduct Authority has extended its pause on commission-related complaints until 4 December 2025 - https://www.fca.org.uk/news/statements/firms-given-until-december-2025-respond-motor-finance-commission-complaints
4. The FCA will begin a six-week consultation to create a national compensation program in October 2025 - https://www.fca.org.uk/news/press-releases/fca-consult-motor-finance-compensation-scheme
5. FCA said the average payout per agreement for commission-related cases is about £950 - https://www.theguardian.com/business/2025/aug/04/who-will-get-car-loan-payout-how-much-regulator