For years, UK car buyers unknowingly paid inflated fees for their vehicle finance deals due to secret commissions pocketed by dealers. This widespread scandal has rocked the automotive financing industry and brought significant changes, including regulatory investigations and court rulings in favor of consumer rights.

If you've purchased a car via Personal Contract Purchase (PCP) or Hire Purchase (HP), you may have been unknowingly affected by these hidden costs. This blog will provide a detailed timeline of the car finance scandal, explain how dealers profited unethically, and show you how recent court rulings could entitle you to a refund. We’ll also provide actionable steps to protect yourself from falling victim to such scams in the future.

Timeline of the Car Finance Scandal
This scandal didn’t happen overnight—it was years in the making. Here’s how it all unfolded:

2010s – Car dealerships and brokers start receiving commissions from lenders for signing customers onto PCP or HP finance deals. These commissions, however, were not disclosed to consumers.

2018 – Investigations by the Financial Conduct Authority (FCA) reveal concerning practices where dealers manipulated interest rates to maximize their own commissions. Customers unknowingly paid higher rates, padding dealers’ profits.

2020 – The FCA issues new regulations forbidding dealerships from increasing interest rates tied to vehicles financed through PCP or HP arrangements. Transparency becomes a key focus.

2023 – A landmark UK court ruling establishes that hidden commissions were unfair to consumers. Victims of these unethical practices are now entitled to legal redress and potential refunds.

Ongoing – Legal firms advise car buyers to check their finance agreements and submit claims for unfairly charged costs due to undisclosed commissions.

The problem is clear—car buyers were denied critical, transparent information about the fees they were paying. Thankfully, progress has been made toward holding the automotive finance industry accountable.

How Dealers Profited from Secret Commissions
Car dealerships have historically worked as intermediaries between lenders and buyers, arranging deals for financing through PCP or HP agreements. While this process seems straightforward, many consumers were unaware of the hidden fees tucked into their contracts. Here’s how profit schemes worked:

Interest Rate Manipulation - Dealers had the autonomy to adjust the interest rates offered to customers. By raising the rates, they earned higher commissions from lenders.

Commission Payout Structures - Lenders incentivized dealerships through scaled commissions, rewarding dealers more for financing deals with higher rates. This structure created a conflict of interest that prioritized dealers’ profits over consumers’ financial well-being.

For car buyers, the consequences were glaring. They paid significantly more for their vehicles over the life of their finance agreements—sometimes unknowingly adding thousands of pounds.

FCA Investigation Into Car Finance
Alarmed by the unethical practices in car finance, the FCA launched an in-depth investigation in 2018. The findings were damning:

Excessive Costs for Consumers – The FCA estimated that interest rate manipulation alone cost customers an additional £300 million a year.

Lack of Transparency – Consumers were largely unaware of the commissions being paid to dealers or the impact it had on the total cost of borrowing.

Conflict of Interest – The FCA found that the system incentivized loans structured to favor maximum dealer commissions rather than consumer affordability.

These revelations led to crucial reforms. Starting from January 2021, the FCA banned commission models that allowed dealers to manipulate customer interest rates. Lenders were required to ensure transparency and fairness, marking a significant victory for consumer rights.

UK Court Rules Against Hidden Commissions
One of the most impactful milestones in this case came with the UK court's landmark decision in 2023. The ruling declared that car buyers were unfairly charged hidden commissions as part of their finance agreements. Dealers and lenders were ordered to compensate affected consumers.

This judgment has opened doors for car buyers to claim refunds on Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements. Legal experts predict that more customers will come forward to challenge disclosed commissions in their agreements, setting a precedent for stricter transparency across the industry.

If you’ve financed a car in the past decade, now is the time to review your contract—refunds and compensation may apply to you.

Are You Eligible for a Refund?
If you financed your car through a PCP or HP plan brokered by a dealer, you may qualify for a refund on excessive charges arising from secret commissions. Here’s how you can assess your eligibility:

Check Your Finance Agreement – Your contract should disclose if any commission fees were paid. Look carefully for terms relating to lender-broker commissions.

Consult a Legal Advisor – Specialist firms and lawyers can verify if hidden commissions were applied to your deal and advise on claim processes.

File a Claim – If you’re eligible, you could reclaim the excess costs due to hidden fees, including overcharged interest. Consumer rights groups and law firms specializing in car finance claims can assist.

Having this clarity could save you hundreds—if not thousands—of pounds.

How to Avoid Future Scams
Buying a car is a significant financial commitment ⁠Avoid future scams. To protect yourself from falling victim to such scandals in the future, consider these proactive tips:

1. Request Full Disclosure
Always request a detailed breakdown of costs when discussing finance options. Ask dealership representatives to explicitly explain fees, interest rates, and any commissions.

2. Compare Offers
Get finance quotations from multiple sources, including banks and lenders directly, to ensure you’re not overpaying via dealership schemes.

3. Read the Terms
Carefully review finance agreements before signing. If you notice ambiguous terms relating to commissions or broker fees, seek clarification.

4. Go Independent
Consider arranging car finance independently through your bank or credit union if dealership financing lacks transparency.

5. Work with FCA-Regulated Dealers
Deal with dealerships that comply strictly with FCA transparency requirements. Check the FCA register to verify authorized dealerships.

Awareness and vigilance are your best protections against unethical practices in the car finance market.

Take Action Today
The UK car finance scandal is a stark reminder of the importance of financial transparency and accountability in all sectors. Whether you’re a victim of hidden commissions or simply looking to better protect yourself in the future, the tools to take control of your financial decisions are available.

Don’t leave money on the table. If you suspect hidden fees inflated your car finance deal, consult a legal advisor today. You could be entitled to a refund or compensation for unfairly charged costs.