Mis-sold car finance has become one of the biggest financial scandals in recent years. Thousands of UK consumers have taken out car loans under unfair terms without knowing the full costs involved. New data suggests that the average payout for a successful claim now stands at £4,500, with some cases exceeding £10,000.

How Did Car Finance Mis-Selling Happen?

Car dealerships and lenders often used discretionary commission arrangements (DCA) to boost their earnings. Under this system, brokers were incentivised to increase interest rates on car loans, resulting in higher payments for borrowers. The Financial Conduct Authority (FCA) launched an investigation into these practices in 2021, uncovering widespread evidence of unfair agreements.

Who Can Claim Compensation?

Anyone who financed a car using Personal Contract Purchase (PCP) or Hire Purchase (HP) between 2007 and 2021 may be eligible. The key indicators of mis-selling include undisclosed commissions, inflated interest rates, and a lack of transparency from lenders. Major lenders like Black Horse Finance have already faced multiple complaints, with successful claimants receiving compensation for unfair charges.

What Are the Average Payouts?

Recent claims data shows the average compensation payout is around £4,500, though it varies by case. Factors affecting payouts include loan amount, interest rate, and the lender’s commission structure. Some claimants have recovered over £10,000, particularly if they paid excessive interest rates over a long-term agreement.

Source: FCA Reports, 2024

How to Start Your Claim?

Making a claim is free if you contact your lender directly. Start by requesting a Subject Access Request (SAR) to obtain loan details. If your claim is rejected, you can escalate it to the Financial Ombudsman Service (FOS). Many claims management firms offer assistance, but they charge a percentage of your payout.

Final Thoughts

If you took out car finance in the past 15 years, you could be owed thousands in compensation. The FCA is reviewing thousands of complaints, and more refunds are expected in 2024. With average payouts reaching £4,500, now is the best time to check if you qualify.