Car finance claims - what PCP car buyers need to know

Following a landmark Supreme Court ruling on 1 August 2025 involving three ordinary drivers, the Financial Conduct Authority (FCA) is setting out its nationwide redress scheme, with final rules expected to be published in late March 2026.

Millions of UK motorists could soon be entitled to compensation over mis-sold car finance, following an investigation into the use of hidden commissions on regulated motor finance agreements—including hire purchase (HP) and personal contract purchase (PCP) deals.

The Financial Conduct Authority (FCA) believes the average average underlying overcharge was £700 per claimant; with successful claimants entitled to 8% statutory interest per year, this puts the average expected payout at £1,000.

Following the conclusion of its consultation in December 2025, the FCA confirmed in a March 2026 update that it is considering over 1,000 responses to its proposals and remains likely to proceed with a scheme.

Around 14 million consumers are estimated to be eligible for redress under the Discretionary Commission Arrangement (DCA) scheme, covering regulated motor finance agreements taken out between April 2007 and November 2024.

While the average payout is still estimated at £700 (plus interest), the FCA noted that some high-interest cases could see significantly higher settlements. However, the FCA has stressed that final decisions on the scheme have not yet been made, and that it will confirm whether it is proceeding alongside the publication of final rules.

The Financial Conduct Authority has set out five requirements that could mean a car owner is due a payout.

The PCP court cases

In October 2024 the Court of Appeal ruled in favour of three people who bought their vehicles on finance, unaware their car dealer had been paid a commission by the lender.

Judges said it was unlawful for commissions to be paid without the borrowers' knowledge or consent.

The court ruled consumers must know all the material facts that could affect their borrowing decision including the total commission to car dealers, and how it was calculated, in order to be able to consent to the loan.

But lenders FirstRand Bank and Close Brothers appealed and in August 2025 the Supreme Court overturned the Court of Appeal's ruling.

It upheld just one case - that of borrower Marcus Johnson - because of the size of the commission the lender paid to the car dealer, and how it was disclosed. The car dealer received 55% of the value of credit as commission, without Mr Johnson's knowledge, which would have had a "material impact" on whether he took out the loan.

The Supreme Court also agreed with several of the points the FCA raised which could lead to an unfair and therefore unlawful deal between lenders and car dealers. Judges said some customers could still receive payouts by bringing claims under the Consumer Credit Act (CCA).

The case has brought the issue of mis-sold car finance back into the spotlight, with drivers who bought their vehicle on Personal Contract Purchase (PCP) or Hire Purchase urged to check if they can make a claim.

FCA investigation into car finance commission

The court case is separate to a Financial Conduct Authority investigation into commission-linked loans sold before January 2021.

The court case is separate to a Financial Conduct Authority investigation into commission-linked loans sold before January 2021. The FCA is set to publish the final Redress Scheme rules in late March 2026.

These rules will apply to car finance agreements (PCP and Hire Purchase) arranged between April 2007 and November 2024 that utilized secret discretionary commission arrangements. Under the upcoming 2026 framework, lenders will be required to follow a streamlined process to contact eligible customers, with the first wave of large-scale compensation payouts expected to begin in July 2026.

In what was being described as the next PPI scandal, the FCA estimates up to 14.2 million finance agreements could be affected, with average payouts around £700 per person and total redress between £8 billion and £12.4 billion.

More information about the issue can be found on the FCA website.

PCP car finance claims

PCP car finance claims relate to vehicle owners who bought their car, van or motorbike using what is known as a Personal Contract Purchase.

This is the name given to the loans sold to enable customers to buy a vehicle when they can't pay the whole amount up front.

They are cheaper than taking out a personal loan or using a hire purchase scheme and involve a deposit and monthly payments. At the end of the contract customers can return the car, upgrade to a new one, or make a final payment to own it, based on its estimated worth at the end of the payment term.

Lenders can pay car dealers a commission for any PCP car finance agreement they sell.

Before January 2021, some lenders allowed brokers, such as car dealers, to increase car finance interest rates so they could take a higher commission.

However, thousands of customers have complained about not knowing this commission - and higher interest rate - was being charged.

The so-called discretionary commission arrangement was banned by the Financial Conduct Authority (FCA) in 2021 to stop incentivising brokers to increase the amount people were charged for loans.

About 40% of car loan deals were thought to use a discretionary commission arrangement, and these discretionary commissions are the focus of the FCA’s proposed redress scheme

Read more: The five car finance factors that could mean you're still entitled to compensation despite court ruling.

Car finance claims how far back

If you were sold a car, van, motorbike or campervan on finance between 6 April 2007 and 1 November 2024 and weren't made aware of the discretionary commission arrangement you may be entitled to compensation.

The vehicle had to be used primarily for personal use, not business.

To lodge a complaint and for more information, visit the FCA's dedicated web page here.

How long do car finance claims take

At the moment, customers are urged to lodge their complaint with their lender to protect their position.

The FCA plans to finalise the redress scheme rules in late March 2026.

To ensure the process is smooth, lenders will then have a three-month implementation window (extending to five months for complex, older agreements) to calculate what is owed.

Consequently, most drivers who are owed compensation could begin receiving payments from around July 2026 onwards.

Importantly, the FCA has streamlined the process: if you have already complained, your lender will automatically assess your case and inform you of the outcome — you do not need to "re-apply" to the scheme.

Some people have already successfully received money via the Financial Ombudsman Service (FOS) or through individual court rulings. The FOS is currently working through a significant volume of cases that fall outside the standard "pause" or that involve specific hardships.

Note on FOS Deadlines: The referral deadline varies depending on when you received a 'Final Response' from your lender:

The Complaints Pause: The temporary pause on lenders having to issue final responses to discretionary commission (DCA) complaints is scheduled to conclude on 31 May 2026. From this date, lenders are legally required to begin clearing the backlog of outstanding claims in line with the FCA's final redress framework.

Under the Consumer Credit Act, the standard limitation period for unfair relationship claims is generally six years from the end of the finance agreement. You should check the FCA’s final rules for any specific "stop-the-clock" protections that apply to the 2026 scheme.

Your lender will send a letter of acknowledgement to confirm they have received your claim. It is not essential to use a claims specialist; you can do this for free. The FCA continues to warn against using claims-management companies (CMCs) that charge fees — often taking over 30% of your final payout for work you can easily do yourself.

To lodge a complaint and for more information, visit the FCA's dedicated web page here.

Car finance claims how much will I get

Initial estimates from the FCA suggest average payouts of around £700 per customer, though drivers with larger loans or those charged particularly high interest rates could be eligible for significantly higher compensation.

There is the potential for lenders to pay interest on top of that.

The Financial Ombudsman Service has already sided with motorists against Lloyds Banking Group's car finance arm, Black Horse, and Barclays Partner Finance.

In these cases victims were paid the difference between the interest rate charged and the lowest available rate at the time.

Future redress will be calculated under the FCA’s uniform scheme rules rather than case-by-case Ombudsman decisions.

Car loans worth £16.9bn were issued in 2023, the Guardian reports.

Recent bank reports show Lloyds has set aside £1.95 billion and Close Brothers around £300 million, bringing industry provisions to roughly £8 – £12.4 billion overall.

Martin Lewis car finance claim

Martin Lewis has produced a free tool to help car finance customers check if they are eligible for compensation and lodge their claim.

To use it you add in some details and a letter is automatically produced, and signed by Martin himself.

Once you have the letter, send it to the loan provider, not the car broker you bought your car with. So perhaps your car finance loan was provided by Black Horse, in which case, send it to them.

Mr Lewis said: "These finance firms let brokers and car dealers make up the interest rates so they could charge more interest, so they got bunged more commission and they didn't tell you that.

"So you couldn't negotiate, you didn't know it wasn't a fixed interest and you could bring it down, which means millions of you overpaid crucially, without knowing.

"So you will not know if this was you. That's why it's so big and important."

He continues to warn motorists not to sign up with claims firms charging fees — it’s free to complain directly to your lender.

When will car finance claims be paid

The official Car Finance Redress Scheme is expected to move into its payout phase in July 2026.

While the FCA will finalise the technical rules in late March 2026, lenders have been granted a period to prepare their systems for the millions of expected claims. Most drivers who lodged 'placeholder' complaints in 2024 and 2025 should receive their compensation or a final decision during the second half of 2026, as lenders are mandated to prioritize the oldest cases first.

MoneySavingExpert has launched its own reclaim tool which helps you draft a letter to the lender, signed by Martin Lewis. Although it is not clear how long it is taking users to get compensation.

If the FCA decides to enforce an official compensation scheme - which will see all those affected paid, regardless of if they have made a complaint, this will launch in 2026.

Drivers are encouraged to log their complaint with the FCA sooner rather than later in case the FCA puts a time limit on the issue in future.

When to complain to the Financial Ombudsman Service

It is a personal decision whether you take your case to the ombudsman and some have decided to take their case straight to the FOS rather than wait for the FCA’s investigation to conclude.

But there are time limits as to when you must contact the FOS.

The FCA says:

More information can be found on the FCA website here.

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