Car finance (hire purchase or personal contract purchase) agreements can be complex, and the Financial Conduct Authority (FCA) has recently found that commission was paid on 95% of contracts taken out. This in itself isn’t necessarily a bad thing – however some commission was ‘hidden’ in the contract.

This refers to a practice in which car dealers and salespeople could earn more commission if customers were sold more expensive contracts, and the customers themselves were unaware of the commission. As a result, the contracts they have entered into may have had hidden charges or higher rates of interest.

When customers take out car, van or motorbike finance contracts, it is essential they are given the information they need to determine whether the contract they are entering into works for them and is financially valid. If you have taken out a PCP or HP contract where information has been withheld, or purposefully confused or hidden, you may have been mis-sold, and are therefore entitled to make a claim.

Taking out a car finance agreement is a significant commitment, and if you haven’t been given the information and transparency you need to make the right choice, you are entitled to make it right.

If you feel you’ve been mis-led or kept in the dark about discretionary commissions or additional costs that have inflate the price of your contract, you may be eligible for compensation.

It can be difficult to know whether you have been mis-sold car finance. The FCA has warned that you may have been mis-sold PCP or HP finance if any of the following are true:

You bought a car under a finance scheme (such as a hire purchase or PCP agreement) before 28 January 2021

There was a discretionary commission arrangement between your lender and broker

You were not aware of the commission being made by the dealership

You were not made aware of the additional costs you could incur through your finance agreements, such as charges for damages.

If you have been affected by any of the above, or felt you were pressured into taking out car finance with your dealership, you may be eligible to make a claim.

Understanding whether your car finance loan was mis-sold can be tricky, and it can be difficult to know where to start. The FCA are likely to state that everyone affected by mis-sold car finance should have the opportunity to claim their refund, without the headache. There will be a structured time frame and process that all companies must follow. The fact many are already setting aside hundreds of millions of pounds is a key indicator that this is very likely to go through.

Each claim will be different, though it is thought that the average value of a mis-sold car finance claim could be roughly £1,600 – with some expected to go much further.

The value of a mis-sold car finance claim will depend upon the total value of the contract, the amount of interest you paid, and the value of any hidden charges. This means that some could be owed thousands in compensation.

The time it takes to finalise a mis-sold car claim can vary from case to case, as it will often depend on how quickly your car dealer or credit broker accepts they are responsible. If liability is accepted quickly, cases can be wrapped up within months. Where liability is disputed, this can take much longer.

There are a number of challenges you can make to the legality of a PCP, but your best bet will be to show that the relationship between you and the lender was unfair as defined by s140A of the Consumer Credit Act 1974. And that relationship is likely to be unfair if you were not told how much commission the car salesman (the broker) was paid by the lender to sell you a PCP.

If your claim is rejected you can appeal to the Financial Ombudsman Service. Many claims that are rejected initially go on to be overturned by the FOS, but this will lead to a delay in your claim.

Lenders must keep records of all their customers’ transactions and dealings for at least 6 years. Under UK data law you are entitled a copy of the sales agreement and supporting documentation and we can make a data subject access request (DSAR) to obtain this documentation for you.