Car Finance Redress: What Drivers Should Know

Many people who bought cars on finance may soon learn how to claim money back.
The regulator is about to set out a new payment plan for around 14 million finance deals that were signed between April 2007 and November 2024.

The plan is expected to give an average settlement of about £700, but the exact amount could vary. Some drivers may get more if they can prove their contracts were unfair or misleading.

The issue is not new. It has gone all the way to Britain’s top court, and a decision from the Supreme Court in August already trimmed the number of cases that can qualify. That ruling cut a possible liability from tens of billions down to about £8 billion in total payouts.

The core problem is how lenders and dealers split commissions. Some deals were set up so that a dealer’s earnings rose when the interest rate on the loan went up. These “discretionary commission arrangements” were often hidden from buyers, giving dealers a financial incentive to charge higher rates.

Other unfair practices include commissions that were 35 percent or more of the loan’s cost, and “tied” deals where a lender got an exclusive right to sell a vehicle without the buyer knowing.

Industry groups say the regulator’s plan might be too wide and could pay people who never suffered a real loss. They worry that the money would go to many innocent customers, leaving less for those who truly need it.

Large banks such as Lloyds have already set aside billions to cover possible payouts, while some smaller firms are cutting jobs because they face higher costs.

Drivers who have been waiting for years after the 2021 ban are still on hold. They must wait for the regulator’s final rules before lenders can reach out and offer compensation. The process may take another few months, and if any lender or claims company disagrees with the rule, they can appeal within 28 days. That could push payments even further back.