Bought a car on finance before 2021? You could be owed compensation

Investigation launched into whether car buyers were charged too much

Anyone who has bought a car on finance over the past few years is being alerted to the fact they could be owed compensation. An investigation is under way to find out whether people were charged too much for car loans.

The Financial Conduct Authority review relates to people who bought cars on finance before 2021. This is where buyers put down a deposit, usually on modern cars or vans, and pay the rest of the loan off in instalments.

It's a very common way of purchasing cars as most people don't have enough cash to buy new models outright, while second hand cars can also be purchased in this way. It follows complaints from around 10,000 people who believe they were charged too much.

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The investigation surrounds whether commission payments to brokers were too high. It could potentially lead to millions of payouts.

The Financial Ombudsman Service (FOS) has resolved two complaints where it found that the way the commission arrangement between the lender and the car dealer worked was unfair on the buyer. This could now lead to a flood of complaints from other people who believe they have been treated in a similar way.

The FCA vowed to ensure drivers get compensation if it finds evidence of "widespread misconduct". Abby Thomas, chief executive of the Financial Ombudsman Service, said: "When people take out a car loan it’s imperative they are treated fairly and the financial implications are totally transparent.

"Unfortunately, that is not always the case. We’ve heard from more than 10,000 people who fear they were charged too much for their finance, and we know many more are waiting in the wings.

"We’ve resolved two complaints where we found that the way the commission arrangement between the lender and the car dealer worked was unfair on the consumer. Our decisions could signal the way forward for many more similar complaints that have not been resolved between firms and consumers.

"That’s why I welcome the Financial Conduct Authority’s decision to assess this issue further. In the meantime, we’re totally committed to continuing to investigate cases with our service.

"If people are concerned about their car loans and are unhappy with how firms have responded, they can come directly to our free, independent service and we will investigate their complaint.”