How Do I Know If I Was Mis-sold Car Finance?

The FCA investigation in 2019 into car finance found widespread mis-selling, estimating that over 40% of car finance agreements may have been mis-sold. That estimate has increased since, with little to no evidence to suggest otherwise.

If you were one of those customers who purchased a vehicle through finance since 2007, you may be asking, how do I know if I was mis-sold and whether you can claim compensation.

The answer is that you probably don’t know for sure, because at the heart of the mis-selling scandal is that the mis-selling was done without the customer’s knowledge.

However, the law states that the burden of proof is on the lender and/or the car dealership to show that they acted legally in all aspects of the process. If they are unable to, then you may be entitled to make a mis-sold car finance claim.

What Were The Most Common Types Of Car Finance Mis-selling?

According to FCA guidelines, a salesperson may have mis-sold you a car finance policy if they failed to present all finance options, adequately explain the details of your contract, and the interest rates charged, make affordability checks, or inform you if they would receive a commission.

In a landmark Court of Appeal case in October 2024, it was ruled that consumers should know all the material facts that could affect their borrowing decision, including the total commission to car dealers, and how it was calculated, in order to be able to consent to the commission payment being made.

In essence, the law requires the lender or car dealership to prove that they acted lawfully throughout the entire process, ensuring they had the customer’s “fully informed consent.”

If they cannot prove this, you may have the right to claim compensation for your mis-sold car finance agreement.

Specifically, an agreement may have been mis-sold if:

• The car salesperson did not inform you that they would receive a commission from the lender for setting up the financial agreement
• The car salesperson did not inform you of all the finance options available, including explaining the differences and responsibilities of each type of product
• The car salesperson did not inform you, with complete transparency, of the interest rates charged for all finance options and how they may differ
• The car salesperson did not offer the best interest rate available to you
• The car salesperson did not adequately explain the details of the financial contract they sold to you, including the Terms and Conditions
• The car salesperson did not conduct adequate affordability checks or talked you into an unaffordable finance agreement
• The car salesperson used high-pressure sales tactics or did not give you adequate time to consider the agreement.

If any of these tactics feel familiar to your experience when purchasing a vehicle through car finance, you may be able to claim compensation.

Even if you are in doubt, as you may well be, as much of this may have occurred without your knowledge, it is the lender or car dealership’s responsibility to prove that they did all of these adequately. If they can’t prove they did all of them, you’ll be entitled to claim for mis-sold car finance.

What Types Of Mis-Sold Car Finance Agreements Are Eligible For Compensation?

Mis-sold car finance claims can be made for all of the following types of car finance agreements:

• You can claim if your car was purchased using a personal contract purchase (PCP)
• You can claim if your car was purchased using a hire purchase agreement (HP)
• You can claim if your car was purchased with a personal loan arranged through a dealership
• You can claim if your car was purchased with a lease purchase agreement
• You can claim for all types of vehicles, including cars, vans, trucks, and motorcycles
• You can claim for both new and second-hand vehicles purchased through finance
• Claims can be made for agreements that are still active, and payments are being made
• Claims can be made for agreements that have ended, and the vehicle has been paid off
• You can claim for multiple vehicles at the same time
• You can claim even if the vehicle was repossessed

You don’t even need your paperwork from your agreements to start your claim. All we need is your name and address, and our mis-sold car finance calculator can find all of your agreements for you.

Aren’t Car Finance Claims Limited To Discretionary Commission Arrangements?

In January 2024, the FCA launched an investigation into mis-sold car finance agreements, specifically looking at hidden discretionary commission arrangements. These agreements enable brokers and dealers to choose from a range of interest rates to offer the consumer, in turn helping them earn inflated commissions. Such practices were banned in 2021.

However, in October 2024, in a landmark Court of Appeal case, it was ruled that the lender should have made consumers aware of all the material facts that could affect their decision to enter into a car finance agreement.

This ruling extended the rights of consumers beyond discretionary commission arrangements to all types of mis-selling activities.

How Much Money Could I Reclaim For a Mis-Sold Car Finance Agreement?

Since 2022, we have represented thousands of clients, successfully winning over 90% of claims that have gone to trial, with the average compensation payout being approximately £1,600.

The exact amount you may be able to reclaim will be dependent on the following factors:

• The size of your car finance loan – generally, the larger the loan, the more you’ll be owed and able to claim back
• The length of your car finance agreement – you’ll be owed more if you’ve been paying the loan for longer
• The interest rate you paid and the difference between the rate quoted and the rate you should have paid.
• The amount you may be able to reclaim may also be affected by the size of the deposit you put down on the vehicle.

Our mis-sold car finance calculator can provide further information on how much you may be able to claim based on the specifics of your agreement.

Make A PCP Car Finance Claim With Bott and Co Solicitors

As the UK’s leading solicitors in mis-sold car finance claims, we have won several significant landmark cases, including the pivotal test case of Mrs Young vs Black Horse, which has opened the doors to thousands of people reclaiming compensation for mis-sold PCP agreements.

We have spent millions in litigation, representing the rights of car finance consumers, and have won numerous test cases that have set a precedent for everyone who may have been mis-sold to have the right to claim, whether Bott and Co. represent them or not.