LONDON — Millions of motorists are being urged to act quickly as a £7.5 billion FCA car finance compensation scheme begins [1], targeting widespread mis-sold car finance agreements across the UK. The regulator said early car finance claims could be processed sooner, with payouts 2026 expected to begin after implementation deadlines this summer.

Two schemes covering 17 years of car finance

The FCA car finance redress programme covers agreements taken out over a 17-year period, from April 2007 to November 2024 [2], following findings that many consumers were overcharged due to undisclosed commission structures.

The scheme is split into two parts:

• Agreements from 6 April 2007 to 31 March 2014
• Agreements from 1 April 2014 to 1 November 2024

Although broadly similar, the calculation of car finance compensation differs slightly between the two groups.

The issue sits at the centre of the car finance scandal, where lenders paid commission to dealers or brokers without clearly informing customers, leading to higher borrowing costs.

Average payouts rise but vary by claim type

The FCA has increased its estimated average car finance compensation to £829 per agreement [3], up from earlier projections. However, payouts vary depending on the type of car finance mis-selling involved.

There are three main categories of car finance claims:

• Discretionary commission arrangements, where dealers could increase interest rates
• Contractual tie agreements, where lenders had preferential arrangements
• High commission cases, where commission formed a large share of the loan

Estimated average payouts include:

• Around £810 for discretionary commission cases
• Around £807 for contractual tie cases
• Around £1,203 for high commission cases

Most customers will be entitled to a car finance refund / PCP refund of some sort. This will depend on what you've lost out financially, plus the commission paid and interest. Interest will be applied at the Bank of England base rate + 1%, minimum of 3% per annum.

In around one in three cases, compensation may be capped to reflect actual financial loss.

Fewer agreements eligible under revised criteria

The FCA has reduced the number of agreements expected to qualify for compensation from 14.2 million to 12.1 million [4].

Eligibility for a car finance claim depends on whether the consumer was treated unfairly. Agreements involving very low commission, typically below £120 to £150 depending on timing, will not qualify.

In addition, where the relationship between the lender and dealer was clearly visible, some agreements may fall outside the scope of car finance claims.

Timeline and deadline for claims

The FCA confirmed that while the scheme has launched, firms will first complete an implementation period:

• 30 June 2026 for newer agreements
• 31 August 2026 for older agreements

After this:

• Firms will have three months to respond to submitted car finance claims
• Firms will have six months to contact eligible customers who have not yet claimed

The regulator expects millions of payouts 2026, with most claims resolved by the end of 2027 and remaining cases completed by early 2028.

Consumers who are not contacted will still be able to submit a car finance claim, but must do so by the final deadline of 31 August 2027.

Why acting early could speed up compensation

Customers who have already made a claim on their car finance or who make a claim before the end of the implementation period are expected to receive payment earlier.

Individuals will not have to wait to hear from anyone. They can do a car finance refund check to know if they are eligible and start their claim.

Tools are available to help consumers identify past agreements if they are unsure of their lender, including credit reference data and finance history checks.

PCP claims and common finance types affected

The scheme applies to the most common types of vehicle finance, including:

• Personal Contract Purchase agreements
• Hire purchase agreements

Given the widespread use of these products, many drivers may be eligible for a PCP claim, PCP refund or broader car finance refund.

Debate over compensation levels

The FCA car finance scheme was designed to provide redress in a consistent and efficient manner, however there have been concerns that losses may not be reflected fully by standardised payouts in certain situations.

There have been individual claims where consumers have been awarded higher levels of car finance compensation than under the scheme averages.

Consumers must choose one route when seeking compensation.

What this means for motorists

The launch of the FCA car finance payout scheme is a huge milestone in the fight for compensation against car finance mis-selling nationwide. Billions to be paid out to drivers who were mis-sold car finance deals.

Claims for mis-sold car finance are now open, and with payouts expected in 2026 it’s important that if you took out car finance between 2007 and 2024, you review your deal to see if you could be owed compensation by car finance providers.

Expect 2027 and beyond to see the scheme take centre stage in making things right by millions of UK citizens affected by the car finance scandal.

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References:

1. Millions of motorists are being urged to act quickly as a £7.5 billion FCA car finance compensation scheme begins - https://www.theguardian.com/business/2026/apr/04/mis-sold-car-loans-compensation-scheme-launched
2. The FCA car finance redress programme covers agreements taken out over a 17-year period, from April 2007 to November 2024 - https://www.fca.org.uk/publication/policy/ps26-3.pdf
3. The FCA has increased its estimated average car finance compensation to £829 per agreement - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
4. The FCA has reduced the number of agreements expected to qualify for compensation from 14.2 million to 12.1 million - https://www.gbnews.com/lifestyle/cars/car-finance-compensation-scheme-drivers-warning