You could be owed over £800 from your car finance - millions of drivers set for payouts

Millions of drivers across the UK could be in line for compensation after the financial watchdog approved a major scheme to refund people who were mis-sold car finance.

The UK regulator, the Financial Conduct Authority (FCA), has confirmed that a formal compensation programme will launch this year, with billions of pounds expected to be paid back to motorists.

Who might qualify for the payout?

If you took out car finance between April 2007 and November 2024, it’s worth paying attention. You may be eligible for compensation if you were charged more than you should have been because of hidden commission arrangements.

This isn’t about a bonus or a windfall. It’s about putting people back in the position they should have been in if the deal had been explained properly at the time and in an era of mis-selling, it's great news for consumers to see the FCA is taking a stand on this.

Why car finance compensation is being paid

The issue centres on how commission worked in some car finance deals.

In certain cases, dealers were allowed to increase the interest rate on a loan in order to earn a higher commission from the lender. Customers were not always told this was happening, which meant they could end up paying more than necessary.

Other agreements involved very high commission payments or arrangements that influenced which lender was recommended.

The regulator has decided that where customers were treated unfairly, they should be compensated.

Who is eligible for car finance compensation

You may be eligible if:

• You took out a car finance agreement between 6 April 2007 and 1 November 2024
• You were not clearly told how commission worked
• Your interest rate may have been increased to boost commission
• The commission on your loan was particularly high

Some agreements are unlikely to be covered, including:

• 0% interest deals
• Very low-commission loans
• Some high-value luxury vehicle finance agreements

If you’re unsure, it’s still worth checking. Many people won’t realise how commission was applied to their loan until they look back at the paperwork.

How much compensation could you receive?

The average payout is expected to be around £829 per agreement, although the exact amount will depend on the details of the loan.

Some people may receive more, particularly if the interest rate increase was significant or the commission was unusually high.

In total, firms are expected to pay out around £7.5 billion to affected drivers.

That sounds like a huge number, and it is. But the payments are designed to refund losses, not create profit.

When will car finance compensation be paid

The scheme will run over several years, with the first payments expected to start this year.

Key dates to know:

• June 30, 2026 - lenders must be ready to handle more recent loans
• August 31, 2026 - deadline for older agreements
• End of 2026 into 2027 - most customers should be contacted if they are eligible

If you are not contacted but believe you may qualify, you will still have time to make a claim.

The current deadline to submit a claim is expected to be August 31, 2027.

Do I need to make a claim right now?

In most cases, no.

Under the rules of the scheme, lenders are responsible for identifying affected customers and contacting them directly.

That means there’s no need to rush or panic.

What you can do now:

• Keep an eye out for letters or emails from your lender
• Check that your contact details are up to date
• Hold on to any old finance paperwork if you still have it
• Be cautious of claims companies offering to help

Whenever a large compensation scheme is announced, claims firms tend to appear quickly.

Some provide a legitimate service, but many charge substantial fees for something you can do yourself for free.

Those fees can be significant - in some cases more than 30 percent of your payout.

The regulator has been clear that there is no requirement to use a claims management company. The process is designed to be straightforward for customers to handle directly.

Vix Leyton says: take your time and don’t pay anyone unnecessarily

“When big compensation schemes hit the headlines, it’s easy to feel like you need to act immediately. But this one is designed to run over time, and most people will be contacted automatically if they’re eligible so sit tight.

The most important thing right now is not to panic and not to pay anyone to do something you can do yourself for free.It's easy to over-think the process and become tempted to hand this process over to 'experts' as typically the quest to get any money back is made deliberately arduous - but that won't be the case here.

If you took out car finance in the last 15 years, keep an eye on your post and your inbox. And if someone contacts you unexpectedly offering to fast-track your claim for a fee, that should always raise questions.”