If you bought a car on finance in the UK, you probably focused on the monthly payment, the deposit and whether the vehicle suited your budget. What you may not have known is that some car finance agreements included commission arrangements between the lender and the broker or dealer. In some cases, these arrangements may have affected the interest rate you were offered.
This has become a major issue for UK drivers because many people were not clearly told how commission worked when they signed their agreement. The Financial Conduct Authority has confirmed a motor finance redress scheme for customers who were treated unfairly between 2007 and 2024, following its review of motor finance agreements and court judgments.
If you are looking into mis-sold pcp claims, hidden commission is one of the key areas to understand. It does not automatically mean every car finance agreement was mis-sold, but it does mean you may want to check whether the full cost, commission and interest rate were explained properly before you signed.
What Is Hidden Commission in Car Finance?
Hidden commission usually refers to a situation where a dealer, broker or intermediary received commission from the lender for arranging your finance, but you were not clearly told about it. In some cases, the commission may have been linked to the interest rate you paid.
One type of arrangement was known as a discretionary commission arrangement, or DCA. The FCA explains that a DCA allowed the broker to adjust the interest rate paid by the customer to receive a higher commission. In simple terms, the higher your interest rate, the more commission the broker could potentially earn.
This matters because you may have believed you were being offered the best or most suitable finance deal available. However, if the commission structure gave the broker an incentive to increase the rate, and this was not properly explained to you, the agreement may not have been as fair or transparent as it should have been.
Why Did This Affect So Many UK Drivers?
Car finance is a huge part of the UK vehicle market. The FCA’s Financial Lives Survey found that 11% of UK adults, around 6.1 million people, held a motor finance product at the time of the survey or in the previous 12 months.
PCP and HP agreements became especially common because they allowed drivers to spread the cost of a car over monthly payments rather than paying the full price upfront. For many households, this made newer or more reliable vehicles feel more affordable.
However, the issue is not simply that commission existed. Commission is not automatically unlawful. The concern is whether you were clearly told about it, whether it created a conflict of interest, whether it affected the interest rate, and whether you were given enough information to make a proper decision.
The Finance & Leasing Association reported that consumer new car finance market new business volumes were 14% higher in the first 2 months of 2026 compared with the same period in 2025, showing that finance remains central to the UK car market. That is why clarity around commission still matters today.
How Could Hidden Commission Have Cost You Money?
If your finance agreement included an unfair or poorly disclosed commission arrangement, you may have paid more than necessary over the term of the agreement.
For example, you might have agreed to monthly payments based on an interest rate that was higher than it needed to be. Over 3, 4 or 5 years, even a small increase in the interest rate could add up to hundreds or thousands of £s.
This can be frustrating because you may have trusted the dealer to guide you through the finance process. Many drivers did not see themselves as negotiating a financial product. They simply wanted to buy a car and were offered a monthly payment that looked manageable.
The problem is that a monthly payment can hide a lot of detail. You may have known what you were paying each month, but not why the interest rate was set at that level or whether another finance option could have been cheaper.
What Types of Car Finance Could Be Affected?
Hidden commission concerns have mainly been linked to motor finance agreements such as Personal Contract Purchase, Hire Purchase and some other credit agreements used to buy vehicles.
A PCP agreement usually involves a deposit, monthly payments and an optional final balloon payment if you want to own the car at the end. HP is different because you generally pay towards ownership throughout the agreement, and the car becomes yours once the final payment is made.
Both types of finance may have involved a dealer or broker arranging the agreement with a lender. That is where commission questions can arise. The key issue is whether there was commission, how it worked, whether it influenced the finance terms, and whether this was disclosed clearly.
Leasing agreements may be treated differently from other motor finance agreements, so it is important not to assume every type of vehicle agreement falls under the same process. The FCA has said leasing complaints are excluded from the further extension of its motor finance complaint pause and firms needed to resume final responses for leasing complaints from 5 December 2025.
How Do You Know If You Might Have Been Affected?
You may want to check your old finance agreement if you bought a car, van or motorbike on finance between 2007 and 2024. You do not necessarily need to still own the vehicle. Even if the agreement has ended, it may still be worth reviewing.
Signs that your finance may need checking include:
- You were not told the dealer or broker would receive commission.
- You were not told that the interest rate could affect commission.
- You were not given clear alternatives or a full explanation of the finance options.
- You felt the focus was mainly on the monthly payment rather than the total cost.
- You were not given enough time to read the paperwork before signing.
- You cannot remember receiving any clear explanation of how the dealer was paid.
None of these points proves a claim by itself, but they can help you decide whether to look more closely at your documents.
Read: Partial Loan Disbursement in Education Loans: Why It Happens & How to Manage It
What Documents Should You Look For?
Start by looking for the finance agreement, pre-contract information, vehicle order form, emails, payment schedule and any documents from the dealer or lender. These may show the lender name, agreement type, APR, total amount payable, term length and any fees.
If you no longer have the paperwork, you may still be able to request information from the lender or check old bank statements to identify who you paid. Claim First notes that a mis-sold car finance claim service will usually ask for a copy of the finance agreement because it sets out the core terms, including the interest rate, total amount payable, repayment schedule and fees.
It is also worth making a short note of what you remember from the sale. For example, did the dealer explain commission? Did they say they were finding you the best rate? Were you shown different options? Did you feel pressured to sign quickly?
What Is Happening With Car Finance Compensation?
The FCA confirmed in March 2026 that it is going ahead with a motor finance redress scheme for customers who were treated unfairly. The scheme relates to certain motor finance commission arrangements and is designed to create a more consistent way for affected customers to receive compensation.
Reports have suggested that around 12.1 million agreements may be eligible under the scheme, with average compensation expected to be around £830 per affected agreement, although the exact amount will depend on the facts of each case.
It is important to be realistic. You should not assume you are automatically owed a fixed amount. Your outcome may depend on your agreement, the dates, the type of finance, what was disclosed, the commission arrangement and how the lender or broker handled the sale.
Can You Make a Claim Yourself?
In many cases, you may be able to complain directly to the lender without using a claims company. The FCA has encouraged consumers to understand the process and be careful about fees before using third parties.
However, some people prefer support because they do not know where to start, have lost paperwork, find the process stressful, or want help understanding whether their agreement looks unfair. If you choose to use any claims service, make sure you understand the fees, cancellation terms and what happens if your claim is successful or unsuccessful.
The Solicitors Regulation Authority has also reminded consumers to understand the terms of no win, no fee motor finance claims, including what fees may apply and what should happen if a claim is not successful.
Final Thoughts
Hidden commission in car finance is not just a technical issue. It goes to the heart of whether you were given clear, fair and honest information when you agreed to borrow money for a vehicle. If the commission arrangement affected your interest rate and was not properly explained, you may have paid more than you should have.
The main thing is not to ignore it. Check your old PCP or HP documents, look at the lender name, review what you were told and consider whether the agreement was explained properly. Even if the car has been sold or the finance has ended, the paperwork may still matter.
If you think your car finance agreement may have been mis-sold, contact Claim First today. It is free to check if you qualify, and Claim First states there are no fees unless your claim is successful. Start your claim review now and find out whether you could be owed money back.