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Car Finance Commission Claims in the UK
If you bought a car on finance like a Personal Contract Purchase (PCP) or Hire Purchase (HP) between 2007 and 2024, you may be owed compensation. The Financial Conduct Authority (FCA) has found that many lenders allowed car dealers to earn secret commission, which often led to customers paying higher interest rates. This practice was particularly prevalent in Discretionary Commission Arrangements (DCA), where the dealer's pay was directly linked to the interest rate they could charge you. This calculator helps you estimate the potential compensation you could claim for this widespread issue.
How the Claim Works
The claim is based on the concept that the commission arrangement between the lender and the dealer was not properly disclosed to you. This lack of transparency is considered unfair under the Consumer Credit Act 1974 and FCA rules. If the commission was discretionary (DCA), the dealer had a financial incentive to increase the interest rate you were offered, directly costing you more money over the life of the loan. Even non-DCA commissions may have been inadequately disclosed, forming the basis for a claim.
How Compensation is Estimated
Compensation aims to put you back in the position you would have been in had the commission been properly disclosed. The calculation typically involves two main parts, which this calculator replicates:
- Identifying the interest attributable to commission: A portion of the total interest you paid is estimated to be a direct result of the commission arrangement. The FCA's review indicates that for DCA agreements, this could be a significant portion (often 20-40% of the total interest). For estimation, we use a factor of 30% for DCA and 10% for other commission types.
- Adding redress interest: Simple interest is added to that amount from the date of your agreement to compensate for the time you were out of pocket. The FCA suggests an interest rate of 8% per year for this purpose, which is the rate we use by default. This is calculated on a daily basis from the agreement date until today.
The final redress amount is the sum of these two parts: the base compensation (interest attributable to commission) plus the redress interest.
A Detailed Worked Example
Let's walk through a real example using the calculator. Imagine you took out a £15,000 PCP deal on 15 June 2018 over 48 months at an APR of 6.9%. The dealer operated under a DCA model.
- First, the calculator checks the agreement is within the FCA scope (between 6 April 2007 and 31 January 2024). This date qualifies.
- It then calculates your estimated monthly payment. Based on the loan amount, term, and APR, this comes to approximately £358.14.
- Over the full 48-month term, you would pay £358.14 * 48 = £17,190.72 in total. The total interest is this amount minus the £15,000 borrowed, which is £2,190.72.
- For a DCA agreement, the calculator applies a 30% factor to the total interest to estimate the portion driven by commission: £2,190.72 * 0.3 = £657.22.
- Next, it calculates redress interest. From 15 June 2018 to 20 October 2026 is roughly 3,040 days. Applying simple interest at 8% per year on £657.22 gives: £657.22 * 0.08 * (3040 / 365.25) = approximately £438.15.
- Your estimated total redress is the sum: £657.22 + £438.15 = £1,095.37.
This figure is an illustrative estimate. Your lender's final offer may vary based on their own assessment of the commission impact and your specific circumstances.
Common Scenarios and What to Expect
Many people wonder about their specific situation. If you had a Hire Purchase (HP) agreement, the calculation works the same way. Older agreements from the early 2010s may have higher APRs, which can lead to a larger base compensation amount. If you settled your agreement early, the calculation becomes more complex, as you would not have paid all the scheduled interest. In such cases, lenders will typically calculate the compensation based on the interest you actually paid up to the settlement date. The most important step for any scenario is to gather your official paperwork.
What to Do Next: Gathering Your Documents
Before you can make a formal complaint to your lender, you need to gather your information. You have a legal right to request a statement of account and a copy of your signed credit agreement. This documentation is crucial as it will confirm the exact figures needed for your claim: the precise amount financed, the APR, the term, and the start date. Having this information strengthens your complaint and ensures your calculations are accurate. Once you have your documents, you can submit a formal complaint to the finance provider. If you are not satisfied with their final response, or if they do not respond within eight weeks, you can escalate your case to the Financial Ombudsman Service for an independent review.