If you are researching a PCP claim and wondering whether discretionary commissions were involved, you are not alone. Many UK drivers are asking the same question, often years after signing their agreement. This uncertainty is common across PCP claims linked to the wider car finance scandal, especially for deals taken out between 2007 and 2024 [1].

Discretionary commission was widely used across the car finance market during this period. In many cases, it operated quietly in the background. Customers were rarely told how it worked, or that it existed at all. This lack of transparency now sits at the centre of concerns around mis-sold car finance and wider car finance mis-selling.

This guide explains discretionary commission in clear, plain English. It outlines the patterns that may suggest a discretionary commission arrangement was used and explains what to do if you are unsure whether your agreement could form part of a car finance claim.

What discretionary commission arrangements were

Discretionary commission arrangements allowed dealers to influence the interest rate a customer paid on their car finance.

The lender would set a minimum interest rate. The dealer could then increase that rate within an agreed range. The higher the rate charged to the customer, the more commission the dealer earned.

This meant dealer earnings were directly linked to how expensive the finance became. Customers were usually unaware that the rate could be adjusted in this way, which is why discretionary commissions are now a key focus of PCP commission claims.

This structure was common in discretionary commission PCP agreements and applied across a large part of the market for many years.

How interest rates were linked to dealer earnings

Under discretionary commission, the interest rate was not always fixed in the way customers assumed.

A lower rate reduced the dealer’s commission. A higher rate increased it. From the customer’s perspective, the rate often appeared standard or pre-set as part of the deal.

In reality, the rate could be influenced behind the scenes. Any increase benefited the dealer rather than the customer.

This link between interest rates and dealer earnings sits at the centre of concerns around hidden commission car finance. It also connects closely to wider pricing issues, including how hidden fees lead to unfair car finance costs, where drivers were not given a clear picture of the true cost of borrowing.

Signs discretionary commission may have been used in your deal

You do not need certainty at this stage. Patterns are often more useful than proof when exploring potential car finance claims.

Some common signs include:

• An interest rate that seemed high compared with similar deals at the time.
• Being told the rate was fixed or non-negotiable.
• A strong focus on monthly payments rather than the overall cost of credit.
• No clear explanation of how the interest rate was set.
• No mention of commission or dealer incentives.

Unclear pricing often appeared alongside complex contract terms. This includes features like mileage limits or balloon payments, which can also affect whether an agreement was mis-sold. These issues are explored further in how mileage limits, balloon payments and terms affect mis-selling claims.

None of these signs confirm discretionary commission on their own. However, they frequently appear in agreements now being reviewed as part of PCP commission claims and wider car finance mis-selling.

Why consumers were often not told

Discretionary commission was rarely explained in a clear or meaningful way.

In some cases, commission was mentioned briefly without explaining how it worked. In others, it was not raised at all. Sales conversations tended to focus on affordability and getting the finance approved.

Interest rates, incentives, and dealer earnings were often treated as background details. As a result, customers were not given the information needed to fully understand how their finance was priced.

This lack of transparency is a central issue in many car finance claims linked to mis-sold car finance.

Why many agreements from 2007 to 2024 fall into scope

Discretionary commission arrangements were used for many years before tighter rules were introduced.

In response to these concerns, the FCA banned discretionary commission arrangements for new car finance agreements from January 2021 [2]. This change stopped dealers from earning more by increasing interest rates on new deals.

However, the ban was not retrospective. Agreements taken out before this point remain in scope for review, which is why PCP and HP deals from 2007 onwards are still being examined as part of the wider car finance scandal.

During this time, disclosure standards varied and regulatory oversight evolved gradually. Many deals were agreed before clear guidance on commission transparency was enforced.

This is why so many historic agreements are now being reviewed for hidden commission car finance practices. This wider review also links to ongoing regulatory work, including how the FCA may structure a redress scheme for car finance customers affected by historic mis-selling.

What matters if you cannot remember the details

Many drivers worry that they do not remember being told about commission. That is normal.

Most customers do not recall detailed conversations about interest rates or dealer incentives. This does not weaken a car finance claim or prevent PCP claims from being assessed.

What matters is what the lender’s records show. These records indicate whether a discretionary commission arrangement was in place at the time of sale.

Poor recall is expected with long-term finance agreements and is not held against the customer.

What to do if you are unsure

If you are unsure whether discretionary commission was used, that uncertainty is a common starting point for car finance claims.

Some drivers begin by using an eligibility checker on a claims management company website. These tools usually ask for basic details, such as the vehicle registration and the year the finance started. They can help indicate whether an agreement may fall within scope without requiring full paperwork or detailed memories.

Others choose to speak directly to a claims management company. These companies can check eligibility, help trace lender records, and manage the car finance claim process on the driver’s behalf.

Both approaches are commonly used by drivers investigating discretionary commission PCP agreements where information is limited.

A final reassurance for UK drivers

Discretionary commissions were a system-wide practice. They were not caused by customer choices or mistakes.

Many drivers entered agreements without knowing how interest rates were set or how dealer incentives worked. That lack of knowledge was common and expected during the period now under review.

If you are asking these questions now, you are not late and you are not alone. You do not need certainty to explore your options.

For many drivers, understanding discretionary commission is simply the first step in deciding whether a wider car finance claim or PCP claim may apply.

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References:

1. deals taken out between 2007 and 2024 - https://www.fca.org.uk/news/press-releases/14m-unfair-motor-loans-compensation-proposed-scheme
2. the FCA banned discretionary commission arrangements for new car finance agreements from January 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models