What are mis-sold car finance claims?

Car finance agreements can be complex and it’s estimated that commission is paid on 95% of contracts taken out.

This means that finance providers often pay the car dealership a fee for selling-on a finance deal to a car-buyer. Commission isn’t always prohibited, but some lenders allowed car dealers to adjust the interest rates they offered customers for car finance. The higher the interest rate, the more commission the broker received (known as a discretionary commission arrangement).

Discretionary commission arrangements created an incentive for brokers to increase how much people were charged for their car loan.

When customers take out motor finance contracts, it is essential they are given the information they need to determine whether the contract they are entering into works for them and is financially valid. If you have taken out a PCP or HP contract where information has been withheld, or purposefully confused or hidden, you may have been mis-sold, and are therefore entitled to make a claim.

Enter your details to find out if you are eligible to claim compensation

What is the process?

You can self-represent and approach the lender directly, go to the Financial Ombudsman Service (FOS), OR you can submit a claim with us and we'll do all the legwork for you.

Slater and Gordon operates on a No-win-No-fee basis. This means it costs you nothing upfront to join. If your claim is successful, we’ll take a pre-agreed percentage as our fee. If we do not win your claim, you won’t owe us a penny.

Can I make a car finance claim?

Taking out a car finance agreement is a significant commitment, and if you haven’t been given the information and transparency you need to make the right choice, you are entitled to make it right.

If you feel you’ve been mis-led or kept in the dark about discretionary commissions or additional costs that have inflate the price of your contract, you may be eligible for compensation.

How do I know if I've been mis-sold car finance?

It can be difficult to know whether you have been mis-sold car finance. The FCA has warned that you may have been mis-sold PCP or HP finance if any of the following are true:

• You bought a car under a finance scheme (such as a hire purchase or PCP agreement) before 28 January 2021
• There was a discretionary commission arrangement between your lender and broker
• You were not aware of the commission being made by the dealership
• You were not made aware of the additional costs you could incur through your finance agreements, such as charges for damages.

If you have been affected by any of the above, or felt you were pressured into taking out car finance with your dealership, you may be eligible to make a claim.

The different types of car finance agreements available

Personal contract purchase (PCP)

A PCP is a popular way of financing a car. Taking out a car on a PCP finance agreement means that you typically pay a deposit up front and then a monthly fee for the car for an agreed number of years. Towards the end of the deal there is the ability to either give the car back for no extra cost or you can pay a substantial lump sum which enables you to keep the car, or you can put the value towards a different car with the same dealership.

Hire purchase agreement (HP)

HP is another way to finance a car. Ordinarily you will pay a deposit, then pay a set amount each month until the loan for the value of the car is paid off in full. With HP, you will own the car once you have made all of the required loan payments.

How do I check if I was mis-sold car finance?

Understanding whether your car finance loan was mis-sold can be tricky, and it can be difficult to know where to start. At Slater and Gordon, we believe that everyone affected by mis-sold car finance should have the opportunity to claim their refund, without the headache. That’s why we’ve made it straightforward – to check if you’re eligible for a car finance refund, simply enter your registration number and we’ll let you know if you’ve got a claim.

How much can I claim for mis-sold car finance?

Each claim will be different, though it is thought that the average value of a mis-sold car finance claim could be roughly £1,600 – with some expected to go much further.

The value of a mis-sold car finance claim will depend upon the total value of the contract, the amount of interest you paid, and the value of any hidden charges. This means that some could be owed thousands in compensation.

To find out how much you could be owed, check your vehicle registration here.

Which finance companies are being investigated for mis-sold car finance?

The FCA’s investigation is currently underway and is predicted to continue until September 2024.

There are a number of finance companies and lenders suspected of mis-selling car finance.

If you have previously financed your vehicle and you believe you have been mis-sold an agreement for the non-disclosure of commissions received by the dealership, or you were inadequately informed of the hidden costs and interest rates, you could be eligible to receive compensation. It is worth getting in touch and finding out if you’re eligible.

We are happy to take on all complaints relating to vans, caravans, motorbikes, boats, planes or any other motor vehicles, but please note that the ongoing FCA investigation is in relation to cars only. The other categories of motor vehicle complaints will be explored with the Regulator moving forwards.

How long does a mis-sold car finance claim take?

The time it takes to finalise a mis-sold car claim can vary from case to case, as it will often depend on how quickly your car dealer or credit broker accepts they are responsible. If liability is accepted quickly, cases can be wrapped up within months. Where liability is disputed, this can take much longer.