For over a decade, many UK car buyers agreed to finance deals that looked fair but came with undisclosed costs. These hidden charges came in the form of commissions that were often buried in the agreement or not mentioned at all.
These commissions led to higher interest rates. The result? Drivers paid more than they needed to—sometimes thousands more.
Now, this practice is under review. If you financed a car, van, or motorbike between 2007 and 2021, this article explains what happened and why it matters today.
The Role of Car Dealers in Finance Agreements
When you buy a car on finance, the dealer often acts as a broker. They connect you with a lender and offer a loan option on the spot. It feels convenient and fast. You choose your car, sign the finance agreement, and drive away.
But many dealers were not acting neutrally.
They had deals with lenders that paid them commission for each agreement. In some cases, they earned more if they set a higher interest rate for the buyer. This is known as a discretionary commission arrangement.
The problem? Most drivers were never told.
What Is a Discretionary Commission?
A discretionary commission gave car dealers control over your interest rate. The higher the rate, the more they earned. Instead of offering the best deal, the dealer could increase your rate to boost their own payout.
Example:
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A lender might offer a 6% base rate.
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The dealer could increase that to 9%.
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The dealer keeps the 3% difference as commission.
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The buyer sees a higher monthly cost—without knowing why.
These commissions were rarely explained. They were often not listed clearly in the finance agreement, and the buyer had no way to compare it with better offers.
Why This Practice Was Harmful
The issue isn’t that commissions existed. The issue is that they were hidden and created a conflict of interest.
Buyers trusted dealers to arrange fair finance. But the setup gave dealers a reason to offer worse deals.
Drivers:
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Paid more over the full term of the loan
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Did not understand why the interest rate was higher
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Could not make informed decisions
In some cases, the extra cost added up to £2,000 to £5,000 over the course of the agreement.
How Widespread Was It?
This practice was common across the UK. It affected:
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PCP (Personal Contract Purchase) agreements
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HP (Hire Purchase) loans
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Car leasing deals tied to ownership
It was used by major dealerships and across many brands. Whether you financed a Ford, VW, Vauxhall, BMW, Mercedes, or another make, you could have been affected.
The timeline spans 2007 to early 2021, before new rules came in.
What Changed in 2021?
In January 2021, the Financial Conduct Authority (FCA) stepped in. It banned discretionary commissions, making it illegal for dealers to earn more by increasing interest rates.
But the damage had already been done. Over 12 years of finance deals may have included hidden commissions that pushed costs higher for millions of drivers.
Now, the FCA is reviewing how these cases were handled—and if refunds should be paid.
What Can Drivers Do About It?
If you financed a vehicle between 2007 and 2021, you may be able to claim compensation. You do not need to still own the vehicle or have all the documents.
To check if you were affected:
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Think back to where you bought the car and how it was financed
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Check who the lender was (not just the dealership name)
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See if the loan was PCP, HP, or similar
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If the commission was not clearly explained, you may have a case
The average claim value is estimated at over £4,000, though this can vary.
Why It’s Worth Checking Now
The FCA is currently reviewing how lenders handled complaints. A full refund scheme could follow, similar to what happened with PPI.
But there may be time limits. Acting early helps ensure your case is counted.
You can:
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Contact the finance provider directly
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Use a regulated claims company
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File a complaint through the Financial Ombudsman Service if needed
Avoid any company that asks for upfront fees or guarantees a result. Always check if the firm is registered.