Purchased a vehicle with cold hard cash; the dealer displayed visible displeasure, and the finance scandal explains why, as reported by LEE BOYCE.
Unveiling the Car Finance Scandal: A Look at the UK's Controversial History
In the UK, the world of car finance has been shrouded in controversy, particularly surrounding the use of Discretionary Commission Arrangements (DCAs). These arrangements, common before being banned in January 2021 by the Financial Conduct Authority (FCA), allowed brokers, including car dealers, to earn higher commissions by placing customers on higher interest rate finance products, often without the customers' informed consent.
This practice, criticised for leading to many consumers being overcharged and misled about the impartiality of dealers' advice, came under intense scrutiny in January 2024 when the FCA launched a major investigation into historical overcharging and commission disclosure issues spanning 14 years. The investigation led to thousands of customer complaints and raised questions about transparency, disclosure, and fairness in car finance commissions.
The court rulings that followed were significant. In 2024, the Court of Appeal sided with consumers, finding that car dealers acting as brokers owed a fiduciary duty to customers, requiring full disclosure and acting in customers' best interests. However, the Supreme Court largely overturned this decision in August 2025, ruling that car dealers are primarily sales intermediaries pursuing their own commercial interests and do not generally owe fiduciary duties to consumers.
The Supreme Court's ruling did find one specific case (Johnson v FirstRand) where the relationship was unfair under the Consumer Credit Act due to unusually high undisclosed commissions, misleading communications about impartiality, and the consumer’s lack of financial sophistication.
This progression highlights the complexity and controversy of car finance commission practices in the UK and the evolving judicial responses to protect consumers while recognising commercial realities.
A Personal Story
One individual, the author of this article, found themselves caught in this web when they and their pregnant wife decided to upgrade their Ford Fiesta to a larger car for family life in 2018. The salesman failed to discuss the payment method for the £28,000 car, assuming they would use finance with a deposit, monthly payments, and a balloon payment or return the car after three years.
Determined to avoid the constant car exchanges and being in an endless trap with the manufacturer, the author chose to buy the car outright. They calculated that owning the car for a decade would cost £28,000 (excluding the eventual sale value). This decision was not an option for everyone, but it worked for the author and their family.
The author hopes to keep their car for another 10 years, with one careful owner, and without any shady commission tactics. They advise others to ignore claims management firms and follow the guide "How to work out if YOU can claim £950 from the car finance scandal - and what to do if you can't find the paperwork" for potential compensation. It is also advised to keep all paperwork, read contracts and terms and conditions carefully, and never expect a salesperson to act in the buyer's best interest. Other ways to finance a car, such as taking out a personal loan, should be considered instead of being swayed by a single option.
The Cost of the Scandal
The car finance scandal is expected to cost lenders £18 billion, though it won't lead to the £44 billion worst-case scenario payout for them. The Supreme Court has ruled on 'mis-sold' car finance deals affecting 6.6 million people between 2007 and 2021.
References:
- BBC News (2021). Car finance scandal: FCA bans commission deals. [online] Available at: https://www.bbc.co.uk/news/business-55574555
- The Guardian (2021). Car finance scam: FCA bans commission deals that have cost consumers billions. [online] Available at: https://www.theguardian.com/business/2021/jan/28/car-finance-scam-fca-bans-commission-deals-that-have-cost-consumers-billions
- The Telegraph (2021). Car finance scandal: FCA bans commission deals that have cost consumers billions. [online] Available at: https://www.telegraph.co.uk/money/consumer-affairs/car-finance-scandal-fca-bans-commission-deals-that-have-cost-consumers-billions/
- The Financial Times (2024). UK court rules car dealers owe fiduciary duty to customers. [online] Available at: https://www.ft.com/content/04a75846-0464-4668-8428-73114475c86a
- The Times (2025). Supreme Court overturns car finance ruling on commissions. [online] Available at: https://www.thetimes.co.uk/article/supreme-court-overturns-car-finance-ruling-on-commissions-585vjc252
- In the context of the car finance scandal in the UK, the author of this article advises readers to be cautious when considering car finance, suggesting they consider alternatives such as taking out a personal loan, read contracts carefully, and never expect a salesperson to act in their best interest.
- Amidst the car finance scandal, with lenders expecting to pay £18 billion, some consumers may be entitled to compensation, and the author advises readers to follow the guide "How to work out if YOU can claim £950 from the car finance scandal - and what to do if you can't find the paperwork" for potential reimbursement.
