Car finance compensation is now in the spotlight. If you’ve ever felt you paid too much on a car finance deal, you’re not alone. In 2025, the FCA is setting up a redress scheme to help people who were mis-sold car finance agreements. Most payouts are expected to be around £700.
This guide explains everything you need to know in plain language:
- What car finance compensation is
- How it compares to PPI compensation
- Who can claim
- Common compensation scenarios
- How to claim
- Should you use a claims management company (CMC)?
- A recent Supreme Court judgment and its impact
- Next steps from the FCA
- Checking if a car has outstanding finance
What Car Finance Compensation Is
Car finance compensation is money returned to customers who were mis-sold finance agreements. Many dealers used discretionary commission arrangements (DCAs), allowing them to increase the interest rate to earn extra money without telling customers.
The FCA is introducing a redress scheme for agreements between 2007 and November 2024, aiming to make it easy for consumers to claim without needing a lawyer or claims company.
How Car Finance Compensation Compares to PPI
Many people compare this to PPI claims. There are similarities:
- Both involve mis-sold financial products.
- Both offer compensation for unfair charges.
Key differences:
- PPI affected millions of consumers for loans, credit cards, and mortgages, whereas car finance compensation is specific to motor finance agreements.
- PPI claims often took years to settle, while the FCA is aiming to make car finance compensation quicker and simpler.
- PPI had a mix of direct and CMC-driven claims, while the FCA wants car finance claims to be accessible without a CMC.
In short, car finance compensation is similar in principle but more straightforward and focused on finance mis-selling in the motor industry.
Who Can Claim Car Finance Compensation
You may be eligible if:
- You took out a car, van, or motorcycle finance agreement between 2007 and November 2024.
- Your agreement included discretionary commission that was not fully explained.
- You have paperwork showing your finance agreement and payments.
You probably cannot claim if:
- Your finance deal started after January 2021, when new rules banned discretionary commissions.
- The commission was fully transparent and legal.
Common Compensation Scenarios
You may get compensation if:
- A dealer added extra interest to earn commission.
- The dealer did not disclose how much commission they were earning.
- You were misled or not given full information about your finance deal.
The exact payout depends on the FCA’s final scheme rules, but the average is around £700.
How many people can claim?
Millions of people could claim car finance compensation. The FCA estimates that up to 14 million finance agreements from 2007 to November 2024 may qualify. This includes anyone who was mis-sold car, van, or motorcycle finance because the dealer didn’t fully explain extra charges or commissions. Most people won’t get huge payouts, but the scheme is designed to help as many customers as possible.
How to Claim Compensation
When the scheme opens:
- Wait for the official launch (expected in 2026).
- Check if your agreement qualifies.
- Submit a claim using the official FCA form.
- Provide documents, like your finance agreement and payment history.
- Get a decision from the scheme.
- Receive your payout if accepted.
Tip: Don’t pay upfront to a claims company (CMC). Some charge high fees and can take a big chunk of your payout.
Should You Use a Claims Management Company (CMC)?
CMCs are companies that help you make compensation claims. They advertise heavily, but the FCA has warned that you don’t need them for car finance claims.
Pros of going direct:
- No fees taken from your payout
- Direct communication with the FCA or lender
- Faster processing
Cons of using a CMC:
- High fees (sometimes up to 30% of your payout)
- Extra paperwork
- Risk of misleading advice
Expert advice: Martin Lewis of MoneySavingExpert says:
“Be careful with car finance reclaim adverts. You could give away 30% of your money and get nothing in return.”
The Supreme Court Case and Its Impact
In 2025, the Supreme Court partially overturned earlier rulings on undisclosed commission. It confirmed that hidden commission alone doesn’t always mean unfairness, but it did uphold claims where the commission was excessive or misleading. This shapes the FCA’s scheme and eligibility criteria.
Next Steps: FCA Consultation
The FCA published Consultation Paper CP25/27 and is seeking feedback until 18 November 2025. After this, the final scheme will be confirmed, and payouts are expected in 2026.
Checking for Outstanding Finance
Before buying a used car, always check if it still has outstanding finance. Using Total Car Check’s Outstanding Finance Check helps you see if a vehicle has live loans or finance agreements. This protects you from hidden liabilities, even if you’re claiming compensation.
FAQ: Car Finance Compensation
Q: Can I claim if I paid off my car early?
A: Yes, you can claim if the finance agreement included undisclosed commission, even if it’s fully paid.
Q: Do I need a lawyer or CMC to claim?
A: No. The FCA’s scheme is designed for direct claims, and using a CMC may reduce your payout.
Q: How much compensation can I get?
A: The average payout is around £700, but it depends on the deal and mis-selling severity. Mulitple payouts could be due to those who had more than car finance agreement.
Q: Are all types of car finance included?
A: The scheme covers most personal car, van, and motorcycle finance agreements from 2007–2024.
Q: How long will it take to receive compensation?
A: Once the scheme starts, payouts are expected within months, though exact timing depends on processing and verification.
Q: How is this different from PPI compensation?
A: It’s similar in that you are reimbursed for mis-sold financial products. However, car finance claims are simpler, more focused, and easier to file directly.
Final Thoughts
The FCA’s car finance compensation scheme is a big opportunity for those mis-sold deals. Most claimants could receive around £700. Avoid CMCs, keep your documents ready, and always check a used car for outstanding finance before buying.
Sources
- FCA (Financial Conduct Authority)
- MoneySavingExpert
- The Guardian
- YourMoney
- The Independent
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