PCP Car Finance Claim: Were You Mis‑Sold?

Millions of UK drivers may have paid too much for car finance. The FCA is reviewing UK car finance mis-selling linked to hidden commission. Dealers could increase interest rates to earn more, without telling you.

If you took out PCP before 2021, you may have a mis-sold car finance case. Many mis-sold car finance claims come down to one issue: you were charged more than necessary.

This guide shows how car finance claims work, who qualifies, and how to check your mis-sold car finance claim quickly.

What is a mis‑sold PCP car finance claim?

Personal contract purchase (PCP) is a popular way to finance a car. You pay a deposit, make monthly payments and decide at the end whether to return the car or pay a balloon payment to keep it. The monthly payments cover the car’s depreciation; the interest is based on the full value of the car, minus your deposit. At the end of the term, you can:

• Pay the balloon payment and keep the car;
• Hand the car back; or
• Take out a new PCP deal.

A mis‑sold car finance claim arises when a lender or broker fails to disclose commission arrangements that affect the interest you pay. Before 2021, many dealers used discretionary commission arrangements (DCAs) that let them increase a borrower’s interest rate to boost their commission. 

Because the broker earned more commission on higher rates, around 40% of car finance deals were affected. These hidden commissions meant customers paid more than necessary. Under the Financial Conduct Authority’s (FCA) 2026 redress scheme, car finance claims UK can be made for agreements taken out between 6 April 2007 and 1 November 2024 if key information about commission wasn’t disclosed.

Mis‑selling doesn’t stop at DCAs. High‑commission deals and exclusive or contractual‑tie arrangements are also covered. These practices meant many drivers signed mis‑sold PCP agreements without understanding the true cost. Over 12 million agreements are expected to be eligible.

How did UK car finance mis‑selling happen?

This is how UK car finance mis-selling actually happened in practice, and why so many mis-sold car finance claims now exist.

Discretionary commission arrangements and hidden fees

A discretionary commission arrangement allowed the dealer to adjust the interest rate on a loan and earn more commission. The FCA estimated that 924,000 customers were paying £500 million in additional interest costs every year because of these arrangements. On a four‑year £10,000 PCP loan, customers could have been charged about £1,100 extra in interest. That’s why car finance commission claims are so important.

In January 2021, the FCA banned DCAs, but millions of agreements pre‑2021 still include hidden commission. The incentives were clear: dealers got paid more for setting higher interest rates, so the consumer lost out. For many drivers, the difference between a fair APR and a commission‑inflated rate was several percentage points, adding hundreds of pounds over the term. UK car finance mis‑selling wasn’t limited to DCAs; some lenders paid unusually high commissions or tied dealers to a single lender, giving the impression of choice while restricting the customer.

High commission and contractual ties

The FCA’s redress scheme recognises two other categories of mis‑selling. High‑commission deals are those where the commission was exceptionally large (at least 39% of the total cost of credit and 10 % of the amount borrowed). Contractual ties occur when a dealer pretends to search the market but is actually tied to a single lender. Customers weren’t told about these arrangements, so they couldn’t shop around. Both situations can lead to a mis‑sold car finance claim.

Scale of the scandal

The FCA estimates around 12.1 million finance agreements were mis‑sold. Discretionary commission arrangements account for the majority, around 11.4 million loans. High‑commission and contractual‑tie cases add millions more. Major lenders on the hook include Lloyds Banking Group, Close Brothers, Barclays, Santander and the Bank of Ireland, along with the finance arms of automakers such as BMW, Mercedes‑Benz and Volkswagen. Many of these firms have set aside billions to cover redress.

Are you eligible to make a mis‑sold car finance claim?

You might be able to claim if your PCP or hire purchase agreement ticked these boxes:

• Date of agreement: You took out PCP or HP finance between 6 April 2007 and 1 November 2024.
• Commission disclosure: Your dealer or lender failed to tell you about the commission or allowed the interest rate to be adjusted to earn more commission.
• Payment impact: You paid more interest than the advertised or typical rate because of hidden commission. Many customers on mis‑sold PCP claims paid £1,100 more on a £10,000 loan.
• Type of commission: Your contract involved a DCA, a high‑commission deal or an exclusive tie to a single lender.
• Not excluded: You didn’t have a zero‑interest deal or a very small commission (less than £120 before April 2014 or £150 after). High‑value loans (top 0.5 % of loans) are excluded from the scheme.

If you meet these conditions, you could bring a mis‑sold car finance claim or PCP car finance claim. You don’t need paperwork; lenders must rely on their own records. Even if you’ve already paid off the loan or sold the car, your right to claim remains.

Which lenders are affected?

The scheme covers loans arranged through thousands of dealers and brokers. The biggest lenders involved include:

• High‑street banks: Lloyds Banking Group, Barclays and Close Brothers. Lloyds alone has set aside over £1.2 billion for compensation.
• Foreign banks: UK arms of Santander and Bank of Ireland.
• Automaker finance arms: Finance subsidiaries of BMW, Mercedes‑Benz, Volkswagen, Audi, Toyota and Vauxhall were named in court filings. They offered PCP finance claims but failed to disclose commissions.

Even if your lender isn’t in this list, you may still be eligible. Over forty per cent of car finance deals included hidden commission, so it’s worth checking.

How much compensation could you claim?

Under the FCA scheme, most people will receive compensation based on two factors: the commission refunded and the estimated loss (the difference between a fair interest rate and what you paid). The average payout is expected to be about £830 per agreement, but the amount varies:

• DCA cases: Average payout about £810, median £517.
• High‑commission cases: Average around £1,203.
• Contractual‑tie cases: Average about £807.

Payouts include interest at the Bank of England base rate plus 1%, with a minimum of 3%. For many borrowers, this means an extra 2% or more on top of the compensation. On a typical £10,000 PCP loan with a 6% APR, you might recoup the hidden commission plus hundreds of pounds in extra interest.

How to make a mis‑sold PCP claim with CaseCraft.AI

Making a PCP finance claim doesn’t have to be stressful. You can complain to your lender yourself; the FCA has a free template letter, but many people prefer guidance. That’s where CaseCraft.AI comes in. Here’s how the process works:

CaseCraft.AI charges no upfront fee. If your claim succeeds, you pay a 10% success fee, far lower than the typical 25% cut taken by “no win no fee” solicitors. For small‑claims cases up to £10,000, legal costs are usually not recoverable, so paying a high percentage can wipe out much of the compensation. 

No win, no fee: what it means for you

Traditional no win, no fee agreements often involve success fees of 25% or more, plus insurance premiums and other costs. In small claims, those expenses quickly eat into your compensation. CaseCraft.AI’s model is different:

• Zero upfront cost. You only pay when you win your mis-sold car finance claim.
• Low success fee. The fee is 10% of the amount recovered.
• AI‑powered efficiency. Automated document generation and smart reminders minimise errors and speed up the process.
• Expert oversight. The platform employs qualified solicitors to ensure legal compliance. 

Take the next step

The car finance scandal is one of the biggest consumer redress schemes since PPI. Hidden commissions meant millions of drivers paid higher interest than they should have. If you took out a PCP or hire purchase deal between 6 April 2007 and 1 November 2024 and weren’t told about commission arrangements, you could have a mis-sold car finance claim. The FCA has confirmed average payouts of around £830, and deadlines are looming.

Ready to find out if you’re eligible? CaseCraft.AI makes it easy. Check your claim today and reclaim what you’re owed.

Disclaimer: The information in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. While we have made every effort to ensure accuracy at the time of publication, the details of the FCA’s motor finance redress scheme may change. You should not rely solely on this article when deciding whether to make a claim. For advice specific to your situation, please consult a qualified legal or financial professional. CaseCraft.AI is not a law firm and does not provide legal advice.