If your car was purchased between 2007 and 2021 through car financing, there’s a chance you were mis-sold an agreement without even realising it. There have been recent investigations and regulatory reviews which unveiled widespread issues in the car finance deals that were offered during this period. As legal developments continue to unfold in 2025, and so are better outcomes for those who were unfairly affected. Exercise your rights and make a significant financial difference by knowing how you can claim compensation and a refund for the mis-sold car finance.

1. What Is Mis-Sold Car Finance?

The reason why a lot of people are unable to file a claim is because they aren’t aware they were mis-sold in the first place. Mis-selling has been rampant among car finance deals since 2007, and a lot of buyers have been fooled into these kinds of agreements. Mis-selling occurs when a dealership, lender or broker fails to give you a fair and transparent car financing agreement. This could lead to agreeing on finance deals that aren’t suitable or are not in your best interest. The harsh truth is that not all people who were mis-sold realise it quickly, and often it takes years to discover there was a grave amount of unfairness in the deal, leading to financial difficulties on the end of the buyer. 

When availing a car financing, it is a requirement in the UK to have the finance provider assess your financial situation to know whether you are eligible for the loan you’re applying for. This assessment also includes explaining the full cost of borrowing and disclosing to you all the commissions and incentives that could have been influential in the deal you were offered. If these steps are skipped or glossed over, then it can result in outright mis-selling.  

Mis-selling isn’t always fraud. Often, it stems from a lack of transparency, inadequate explanation and conflicts of interest. Here are the common mis-selling scenarios:

Affordability isn’t properly assessed

When getting a loan, all lenders are required by law to assess and check whether the deal is financially suitable for the client. This is the same with car finance agreements. When assessing, it isn’t limited to the time of signing only. The full repayment period should be included in the assessment too. There are often cases where checks are skipped or rushed, which only means customers were approved for financing options and monthly repayments which may put them in debt or cause financial strain and missed payments once the contract starts to roll. 

Here’s an example scenario. Your lender, when going over your credit history has seen that a more modest vehicle is the one that will fit you financially. However, they still offered you a premium car with an even higher monthly payment, without telling about what is really a fit based on your financial standing. If instances like this or close to this has occurred on your car finance deal, then you might want to check if it passes as a case of mis-selling.  

Interest Rates Weren’t Clearly Explained

All car finance deals must clearly explain how much the total cost you’re paying, and this includes the interest rate, fees and other optional extras which were added to your loan. You may think it was a good deal because the lender offered a “low monthly payment”, only to find out this meant extending the loan long term too. If you were paying thousands more than the actual car’s value brought about by interest, then you should rethink your options. 

Undisclosed Discretionary Commission Arrangements

Coined to be one of the most controversial aspects of mis-selling cases, DCAs or Discretionary Commission Arrangements have been the subject of FCA investigations. Dealers have always had the discretion to charge their preferred interest rates, which is an opportunity they have mostly abused. Rather than make the interest fit what they could only afford, most dealers would intentionally inflate it, as it means more commission for them. The problem with this set-up however, is that these commissions weren’t disclosed to consumers. Car finance customers are often unaware that the interest rate was increased to benefit the dealer and broker, which poses a problematic system that has been romanticised by many dealers. 

This could also mean that even if two individuals have the same credit profile, they may still be given different interest rates, because one salesperson wanted to earn more commission. 

Why You Might Not Know You Were Mis-Sold

While considered a fraudulent act, not all cases of mis-selling are obvious. Most times, you will feel okay and satisfied with the deal you were offered, thinking it’s the best you can get, only to find out after that:

• You are paying more than expected, because of additional fees, or because the term was extended for another year or two to make monthly payments look lower. 
• Your credit history was damaged due to affordability issues or because you weren’t able to pay on time
• You have no idea about how your deal was structured because the dealer never thoroughly explained it to you

Some mis-selling cases are only discovered after the entire payment has been made, and this may be in cases where the buyer was able to pay up to date, but it still doesn’t mean that the finance deal is considered legal already. In fact, there are many cases that have only been discovered when the issue of mis-selling started to heat up. 

Mis-selling has become one of the biggest financial fairness scandals in the history of the UK, almost at par with the PPI in terms of scale and impact. Millions of car buyers have unknowingly been signing into finance agreements that were overpriced and unfair and this scheme has been  for over a decade. Hence, 2025 is a year full of intense legal and regulatory scrutiny for those who unfairly caused these agreements. After the 2025 ruling has been issued, a new set of rules and regulations is expected to take effect, and this will determine a more structured way of computing how much consumers may be able to claim back. 

Key Factors in the Mis-sold cases

The Statistics

Between 2007 and 2021, over 90% of car purchases were made using car financing, making it a dominant way for UK drivers to acquire a new or used vehicle. Based on estimates, there were about 12 million+ + car finance agreements that were issued during this period, and many of these agreements were sold through brokers and dealers. These PCP (Personal Contract Purchase) and HP (Hire Purchase) agreements are structured in a way that allows brokers and dealers to maximise profits through incentives from commissions, rather than giving buyers the best deal they can get. What’s unfortunate in this scenario is that it went unnoticed for years, causing millions to overpay on contracts and agree to terms that weren’t in their best interest. 

FCA Investigation: A Deep Dive into Commission Abuse

Discretionary Commission Arrangements were seen as the biggest culprit of these mis-selling claims. Since the payment structure is not standard, the dealers and brokers are allowed to choose how much interest rate they want to charge the buyer, which means more commission for them. The higher the consumers pay, the more a broker will benefit and profit. This system clearly shows a conflict of interest, allowing lenders to get away with charging excessive and unjustified interest rates. After discovering a widespread use of discretionary commission arrangements, the Financial Conduct Authority (FCA) started conducting thorough investigations and learned how DCAs have been benefiting lenders in the process. This specific arrangement has allowed brokers to:

• Set their preferred commission rates on car financing deals, without prioritising consumers' interest.
• Choose the interest rate that gives them a wide margin of profit. 

In January 2024, the FCA decided to pause complaint deadlines while assessing whether a mass redress scheme is needed. This also means potential billions to be refunded to the affected consumers. 

Hence, while DCAs have been banned since 2021, it has not solved the millions of historic cases that put consumers on financial distress. This is why in January 2024, the FCA decided to pause complaint deadlines while assessing whether a mass redress scheme is needed. This also means potential billions to be refunded to the affected consumers. 

Supreme Court Ruling Expected July 2025

The car finance industry is expecting a ruling by July 2025, and this will mark a turning point in this mass fight for fair compensation in the car finance industry. This landmark ruling will answer the pivotal legal questions that have long complicated the refund process for mis-sold finance agreements. While already dubbed a biased structure, the question of whether disclosing discretionary commissions violates the Consumer Credit Act remains unanswered. Among the questions here too is whether the liability extends beyond lenders, including brokers and car dealers who play a role in mis-selling. The decision expected from here can fundamentally shape how claims are and will be processed in the future, plus increasing the number of eligible consumers, alerting relevant bodies to enforce compensation to those affected by mis-selling. 

The issue of mis-selling in the car finance industry isn’t simply a technicality in the fine print. What really is the subject here is fairness, transparency and trust that have been broken due to intentional inflation that affected the ability of consumers to pay. Dealers and brokers did not simply increase the margin; they violated consumer rights, secretly inflating the interest to mean more commission for them, or offered an unaffordable agreement, bypassing what you can only afford based on your financial standing. What you may not know is that you can claim more than the amount you excessively paid. This can come in the form of compensation for the financial distress that you experienced due to the mis-sold car finance you had with them. You may think, Isn’t this simply a minor oversight? The answer is no. These may look like small mistakes but it’s a breach of the legal and fundamental consumer protection. 

Apart from the ruling being a legal milestone, it’s also a window of opportunity for getting back what you were owed in the first place. If you believe you were mis-sold, then it’s high time to act now. Review your agreement and gather the documents along with a claims specialist.  They can be your best ally in this financial battle. Be proactive to ensure a stronger position considering what’s about to unfold in the coming months. 

2a. How Do I Know If I Was Mis-Sold Car Finance?

Many people only discover that they were mis-sold car finance after they have finished paying off the agreement. And whether they paid excessively or not, they do not think it’s a negative thing because they trust their dealers so much. Mis-selling doesn’t always look sketchy. It’s often cloaked in the fine print or disguised by a vague explanation by your dealer. Here are warning signs that you may have been mis-sold an agreement.  

There is suddenly a final balloon payment being asked of you

A common scenario in PCP deals, a final balloon payment may come off as a surprise, especially if it was not disclosed to you ahead of time. Also, if you have no budget for this, it may lead to financial difficulties and inconvenience on your end, as you initially believe you’re already done with the payments and that you can take your car home. If this is the case, then it can be referred to as mis-selling. 

You were never fully informed about your interest rate and how it was structured

Most dealers are able to hide the inflated interest rates by making the monthly payments appear lower. This is possible by extending the span of months you’re paying, without you noticing that it has increased the overall cost you need to pay. 

Your dealer earned commission without you knowing

Your broker won’t most likely inform you they are earning a commission from your purchase or deal especially if it means increasing the total amount you pay, or offering you a deal that is much more expensive than what you anticipated. If they got a commission which you are not aware of, and it was proven that the commission boosted their earnings, then it would constitute a breach of duty which is a factor in mis-selling. 

You did not understand the long-term cost of your contract 

The dealer who offered you the car financing contract should have explained properly the finance structure that was used in the computation of your total cost. If this isn’t the case, then it may have been because you were blinded to committing to terms that aren’t right for you. 

Your income and expenses weren’t properly assessed

All car finance terms should include proper affordability checks to ensure that you are capable of paying out the loan you’re taking. This is not only an assurance for the lender, but also a regulatory check that’s beneficial for you as a customer. Through an affordability check, you can assess whether this loan is something you can realistically pull off. 

If any of these feel exactly like your situation, then you may have been mis-sold car finance. 

2b. How Mis-Sold Car Finance Affects Your Credit Score

The first time you were offered this car financing deal, you thought, “oh, it’s the one that fits right into my budget”. Apart from being a cost-effective option, you have more flexibility especially if it’s a PCP deal. What you may not realise at first is that it was poorly structured, or that it was a mis-sold care finance agreement in the first place, until this deal starts draining your bank account. You may think you can handle it at first, but missed car payments can cause long-lasting damage to your credit report. 

If you too have found yourself struggling to make payments or were forced to refinance just to be able to keep the deal, then you are not alone, and like many people, you can also make a claim. In fact, this tactic of encouraging consumers to agreements that are not affordable to begin with, has been used by many lenders as well. But it’s not just about being offered an unfair deal. It’s what these unfair deals can cost you, and in this case, your credit score. 

Mis-sold finance deals have been a reason why most credit scores have been damaged in the past, and what you can do to recover.

Missed or Late Payments

The first reason why your credit score is impacted by falling victim to a mis-sold deal is that you aren’t able to pay on time. This can happen with monthly payments that stretch your budget too much. If you’ve been stuck in a situation where you struggle to juggle your bills with the car, and the payments started bouncing, then you may be experiencing financial stress that may or may not be your fault in the first place. Often, it is because you are paying out a bill that you can’t afford at all, and this is because of a possible mis-selling. 

Be cautious as once this pattern of missed payment begins, you may easily fall into a debt spiral which puts your credit score at risk. 

Defaults or Arrears

One thing you don’t want to appear on your credit file is a default, which happens when you fall behind by several payments. It can stay on your file for six years, and even if you are able to pay it off, it will still show future lenders that you have been behind payments, and it will treat you as a high risk borrower.

Higher Future Borrowing Costs

A low credit score can make borrowing in the future more expensive, and that’s if you still get credit at all. Mis-sold deals or those that lead to default or repossession can damage everything from your ability to acquire a mortgage to increased interest rates on your future credit card. Poor credit can actually cost you more in the future. 

Rolling Into Another Deal to “Fix” It

While it may look like an outright extortion, most consumers who fall into cycles of debt or inability to pay are encouraged to refinance or trade in their car early to manage these unaffordable payments. If you refinance a loan, then it will only increase the size of your loan and push monthly costs even higher, digging you into a grave of debts. 

Direct impacts like the above are something you would have foreseen after not being able to pay out your loan on time. However there are also longer term and less visible effects of mis-selling that build up over time, such as reduced access to credit, strained cash flow, and the mental and emotional stress that the mis-selling has caused you. 

Here are a few tips on how you can be able to rebuild your credit after being mis-sold a deal:

Get a copy of your credit report. 

There are services like Equifax, TransUnion, and Experian, which are in free versions and can give you access to your credit report. Check any missed payment defaults and other red flags that may be linked to your car finance account. Once done, you can keep it in a printed file to make it easier to track down.

Raise your mis-selling complaint.

It’s best to contact your dealer first and clearly explain to them why you believe the finance you were offered was mis-sold. If they don’t resolve it, you must escalate it to the Financial Ombudsman Service (UK) or any other regulatory body to ensure your complaint is being considered and acted upon. 

Request Credit Report Appointments.

Once the mis-selling has been acknowledged by your lender, then the next step is to ask them to remove it from your file or/and amend any negative markers. Most times, they are willing to do this and reflect that the issue in your file was due to an unfair agreement. 

Ensure you practice positive credit habits.

Even if you have a damaged credit score, there are still chances to improve your score.  More consistent payments on smaller, manageable credit such as a secured credit card or utility bill can help in rebuilding your rating. 

2c. The Long-Term Implications of Discretionary Commissions

Discretionary Commission Arrangements are being carefully reviewed and it’s for a reason that will benefit consumers. Here are the reasons why DCAs are at the centre of the finance scandal. 

• It was hidden from consumers.
• The DCA has incentivised brokers to raise their interest rates because it meant higher commission.
• The commission was added without your knowledge or consent
• You were not informed that the commission caused an increase in your total cost 

Now what is the bigger implication for all these? Often, it goes overlooked but DCAs have long-term effects that we do not realise right away. Here’s a preview of what it could mean for you:

You may be overpaying your lender by hundreds or thousands of pounds. 

While you may think it’s a small increase, being just 2-3%, when summed up, it can add up significantly over the years. This is something most customers do not notice right away as well. 

You were denied the chance to look around for other deals

If you had the slightest idea that your interest was inflated, chances are you would have opted for other deals, and DCAs have hindered your chances to negotiate your rate elsewhere.

You were misled about how your rate was determined.

You initially think that your rate was based on your credit score only to be surprised, it isn’t. Your rate was instead determined from how much your dealer wanted to earn on the deal. 

The long-term consumer harm brought about by DCAs is making the issue bigger. While already banned in 2021, the continuous effect is still detrimental to many consumers.

2d. How Long Does a Mis-Sold Car Finance Claim Typically Take?

If you’re wondering how long a mis-sold car finance takes, then the answer is that it depends on how much you know, the timing and the preparation you have. But the claims process can be very straightforward. You just have to know what exactly each step entails and what you can expect at every stage. Here’s an overview of the typical timeline. 

6 to 16 weeks

These are the first couple of weeks after your submission, and chances are you may have your claim resolved immediately, especially if your lender cooperates and agrees with your claim request.

16+ weeks

Beyond 16 weeks is for more complex cases, that either involve multiple agreements, poor record-keeping, and disputed facts that may make the wait even more longer. 

FCA pause

In early 2024, the FCA has lifted complaint deadlines while reviewing the bigger impact of this potential industry-wide compensation claim. However, it is not a halt rather a trigger for those affected to prepare their claims and file as early as possible. 

Why Act Now?

In July 2025, we’re expecting the Supreme Court ruling to come out, and it may speed up the resolutions, or if not, change entirely the way claims are assessed. Experts are assuming that the FCA may introduce redress schemes, which will make the claims in the system be processed faster. Hence the delays and backlogs are simply those claims that hit post-ruling. While the SC decision is expected to favour consumers, it’s still ideal to act as early as now. This way, you’re put ahead of the curve, and potentially, if lucky, even at the front of the queue.

3. Are You Eligible for a Refund?

Consumers who availed their car finance deals from 2007 to 2021 has high chances of being owed a refund, as there’s a possibility they were mis-sold, given the amount of mis-selling that occurred between these years. 

Truth is you don’t need to be a legal expert to know if you’re eligible for a refund. As long as you’re able to tick the red flags, then it makes you entitled to compensation, overpaid interest and more. 

Here’s the Common Eligibility Criteria we have, and if any of the following applies to you, then it’s time to make that claim:

Common Eligibility Criteria

You were charged excessively or there was a hidden interest rate or fee added to your total cost

The first thing you should check if you want to know whether you are eligible for a refund is by assessing the interest rate you were charged. Was it higher than necessary? Or higher than what you initially expected or were informed? Under DCA, most dealers and lenders intentionally marked up their interest rates so they would get more commission. If this is also the case with you, then you may have been charged more than you should originally have, based on your credit score. 

You weren’t told about commissions or fees

It's necessary that your lender informs you of any additional fees and commissions that are topped up on your deal. If not. Then this could be because your deal was structured in a way that favours them. Not disclosing that there was a commission involved is a breach of the FCA rules, and automatically entitles you to a refund claim. 

4. What Can You Get Back If You Were Mis-Sold?

If you have proven that you were mis-sold car finance, then you can be entitled to either refund the overpaid interest, and also compensation for the inconvenience brought about by the mis-selling. Depending on your case, the compensation can also include fees and additional charges. 

Here’s what successful claims typically recover:

Overpaid Interest

Since this is an amount that should not have been paid in the first place, this is exactly something you can include in your claim. Discretionary Commission Arrangements have led to inflated interest rates, costing consumers hundreds, even thousands more than what is necessary. An overpaid interest usually happens when you are offered a higher-than-market rate for interest. If this is the case, compute how much you overpaid. There are cases where refunds for overpaid interest go as high as £5,000, so it’s essential to check and make your claim if necessary.

Unfair Commission Charges

Undisclosed commission can be refunded too. If you weren’t told that the dealer was earning commission, then you can simply find out how much they earned, and include that in the amount you are refunding. Apart from interest payments, there are hidden commissions which should be included in the amount you’re claiming back. 

Compensation for Financial Distress

Mis-selling has indirect impacts that at first you cannot put a value on, but if it led to missed payments, defaults, debt collection or even repossession, then you can request additional compensation for the financial hardship you had to endure due to the mis-selling. This isn’t something very common but compensation can go from hundreds to thousands depending on how much you were affected. 

How to compute your claim?

Each case is different, and while someone you know may earn as much as a thousand pounds, you can only be subject to half that amount, or vice versa. Simply, compute how much your total payment cost is, and deduct the value of the inflated interest rate, and the other charges and fees that were unnecessary. If you need an estimate, you can use a personalised refund calculator to gauge how much you’re able to recover.  

5. How to Start a Claim

Starting a claim isn’t as horrendous as you may think. In fact it’s easier especially if you are well aware of how it works. The important thing is to make the first step. Here are the options you can consider:

Option 1: Submit directly to the lender

If you think you have been mis-sold, you have the right to complaint directly to the lender, and they have up to eight weeks to respond. Should you choose to reject your claim or fail to respond, then the next step is to escalate this matter to the Financial Ombudsman Service (FOS). This is a free option, however, you will need to invest more time in it. 

Option 2: Use a Claims Management Company

Some may opt to do it on their own and that’s totally okay, however if you think you don’t have enough time, then another way you can make your claim is through a claims management company. They will handle all the communication, gather and submit the needed evidence, and negotiate with the lender on your behalf. Getting a reputable claims management firm can also save you time and stress, especially if you are not confident you can make the claim on your own. While they will charge you a fee, there are PCP claims companies that offer a “No Win, No Fee” which means they will only get paid once they’ve won your mis-selling claim. 

Documents That Help Your Claim

Documents are vital in ensuring your claim is a success. It acts as your most important proof in proving that you were mis-sold and that you were offered an unfair deal. Now what important documents will you need?

• Your car finance agreement or contract - If you don’t have a copy of this anymore, then what you can do is reach out to your lender to request another copy as they are required by law to issue one upon your asking. 
• Any emails, texts, or messages you had with the dealer or broker - They will show how the conversation went on
• Bank statements that show proof of payments
• Any evidence that will show there was no commission disclosed

In case you’re missing some of these, you can still ask a specialist to retrieve them for you, as all these documents are with your lenders too. 

Hence, you don’t need to hire an expert right away. You can check your eligibility yourself by assessing if your case ticks any of these red flags. 

6. Why Now Is the Time to Act

Timing is crucial when filing a mis-sold car finance claim. At present, there’s a cusp of major legal and regulatory changes that can dramatically impact how claims are being handled, how it is resolved, and most importantly, how much compensation needs to be paid.

The landmark Supreme Court Ruling in July 2025 will shape the trajectory of how car financing claims will be assessed in the future. The UK Supreme Court is expected to issue a key ruling, which will dictate a more structured way of handling claims, and maybe make it even more proactive. 

The ruling will set an even clearer and legal precedent on what is considered an unfair commission structure, while strengthening consumer rights around interest rate disclosure. This then, can open the floodgates for a new wave of claims, adding more into the queue of claims to be handled.

However, there’s still uncertainty as of the moment, as there is no assurance that the ruling will favour all affected consumers. What’s sure is that the ruling will affect how claims will be reviewed. If it favours consumers, however, millions of finance agreements could be made eligible for a redress scheme. 

The FCA, on the other hand, will play a vital role in issuing enforcement actions against lenders and brokers and set clearer rules on redress and disclosure obligations. It may introduce deadlines for new claims, which is close and similar to what happened with PPI, and depending on how the SC rules, the FCA could force lenders to move quickly, and avoid delays. Hence it can also enforce stricter eligibility checks and a cut-off that may affect claims that are submitted with latter timelines. 

This is why it’s important to act as early as possible, to avoid being fed into backlogs, and ensure faster resolutions. Acting now means putting your case under the current condition, which is certainly favourable for lenders. Waiting could cost you, should deadlines be introduced later. If you think you may have been mis-sold car finance, now is the best time to check. It’s fast, free, and puts you ahead of the likely surge of claims after July 2025.