If you bought a car on finance in the last fifteen years or so, you may have seen the headlines about mis-sold car finance. A lot of drivers could be affected, and the story has been running in the courts and the news for a long time. Here it is in plain English.
What “mis-sold” means here
Most cars bought on finance are paid for through a deal set up by the dealer. The dealer acts as a broker and gets paid commission by the lender for arranging it. That is normal and legal.
The problem was how some of that commission worked. Under what were called discretionary commission arrangements, the dealer could set your interest rate within a range. The higher the rate, the more commission the dealer earned. Many buyers had no idea this was going on, and some ended up paying far more than they needed to.
The Financial Conduct Authority (FCA) banned these arrangements in January 2021. Complaints about older deals kept piling up, and in 2024 the FCA paused the clock on them while it looked into the problem.
What the courts decided
The issue went all the way to the Supreme Court. In August 2025 it ruled that car dealers did not owe buyers the special legal duty some lower judges had found. That was a win for lenders on most points.
But the court also upheld one buyer’s claim. In that case, the commission was very high, it wasn’t properly explained, and there was a hidden tie between the dealer and the lender. The court said this made the relationship unfair under the Consumer Credit Act. So hidden commission can still give rise to a claim, depending on the facts.
The FCA redress scheme
After the ruling, the FCA set up an industry-wide compensation scheme. Its final rules were published in March 2026. The scheme covers regulated motor finance deals taken out between 6 April 2007 and 1 November 2024, where buyers were treated unfairly over commission.
Things have not gone smoothly. Two lenders, a third finance firm and a consumer group challenged the scheme at the Upper Tribunal. In July 2026 parts of it were suspended, which means lenders don’t have to work out or pay compensation for now. In October 2026 the FCA said the challenges will be heard in February 2027. Until then, payouts are on hold, and the scheme could still change.
What you can do now
You don’t have to wait to get organised. Some simple steps:
- Dig out your old finance agreements, or ask your lender for copies.
- Note the dates, the car, the lender and the dealer.
- Watch the FCA website for updates on the scheme.
You can complain to your lender yourself for free. You don’t have to use a claims firm, and if you do, check the fees carefully. Some take a big cut.
If your case looks unusual, or the amounts are large, speaking to an auto lawyer can help you work out your options. Every deal is different, so get advice on your own agreement rather than relying on headlines.
Why this matters to you
Car finance is a very common way to buy a car in the UK, so this touches a huge number of households. For some it may mean money back. For others there may be nothing owed. Keeping your paperwork ready and following trusted updates is the best way to be in a good position once the legal challenges are settled.
