Car finance can be a costly affair for your finances and something that feels never-ending, especially if you go from one car finance agreement to the next.
However, owning a vehicle has become incredibly relied upon for many households up and down the country, so to imagine life without your car can feel pretty restrictive.
It’s worth knowing that millions of UK motorists who bought a vehicle, whether that be a car, van or motorcycle on finance, may be eligible for compensation due to hidden commission payments. There are an estimated 14 million agreements affected, so if you’ve taken out finance between 2007 and 2024 on a car, then you may be able to recover these hidden car finance costs.
This guide will share how to do just that and hopefully help to optimise your finances with a little cash boost.
What are the hidden costs?
Discretionary Commission Arrangements were banned by the FCA in 2021. Finance brokers, aka the car dealers, were allowed to set the interest rate for the customer’s loan, and as such, dealers were incentivised to hide the true cost of borrowing and to inflate the interest rates in order to boost their own profits.
Beyond high interest, agreements often came with extra charges from documentation fees to admin fees, which weren’t transparent in their explanation to customers.
How to identify if you were affected
So how do you know if you’ve been affected? Well, if you purchased a vehicle via PCP, then you might be entitled to a PCP claim if it was between April 2007 and November 2024.
It’s good to check any old paperwork for the words ‘commission’ or ‘high interest rates’. If you can’t find the paperwork, contact the dealer or lender to send you a copy, as they’re required to keep records for six years after the agreement ends.
How to recover the costs
To recover the costs, the FCA is currently conducting a review and therefore plans to launch an automated redress scheme in early 2026. You can do it yourself for free, but make sure you’re using DIY reputable tools like MoneySaving Expert’s car finance reclaim tool. A claims management company can help assist with your claim, too.
Be prepared to submit a complaint, even though complaints are currently paused. It’s still good to lodge a complaint so that you avoid being timed out. The FCA will likely instruct lenders to proactively contact you if you have a deal that falls within the scope, which then makes the whole process easier to recover your compensation without needing to do much.
Tips to avoid future hidden costs
When you’re taking out car finance or any finance in the future, be aware of the APR, compare this to the total cost of credit and not just the monthly payments. Use third-party financing to compare with dealer financing and check for any hidden fees by asking for a full breakdown of everything before signing.
It’s good practice to be aware of hidden car finance costs and how to retrieve these so you’re not left out of pocket.