Car Finance Claims & Refunds: How to Claim Mis-Sold Car Finance

Car financing is one of the most common ways for UK consumers to purchase vehicles, offering affordability through structured payments. Alongside the popularity of this car financing option is the growing number of people who have unknowingly entered into mis-sold agreements due to the lack of knowledge on car financing itself and its possible downsides. 

If you suspect you were mis-sold a car finance agreement, act promptly to avoid missing claim deadlines and improve your chances of success. There are different avenues you can seek help from, such as regulatory bodies like the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS). Here, we’ll walk you through car finance refunds and the process of how to claim mis-sold car finance. To ensure a smooth experience, we’ve broken down the key aspects – eligibility for a claim, which mistakes to avoid, tips on gathering evidence, and what happens after filing a claim. We will also delve into the appeal process and even escalate to the FOS. 

Understanding the history of car finance complaints can help you determine if your case qualifies. Below is a timeline of key events that have shaped the claims process.

A Timeline of Key Events for PCP Car Finance Claims

While car finance complaints have only started to increase in the last few years, where more movements and communities have helped raise awareness, the car finance claim scandal started in 2007. It’s important to be aware of the historical timeline as it contains updates on the deadlines and rulings that can be significant to your claim.

• April 2007: Cases of mis-sold agreements started. This is the start date on where complaints were accepted by the FCA, meaning any possible mis-selling that occurred before this would not be entertained anymore. 
• January 2021: The FCA banned Discretionary Commission Arrangements (DCA) to prevent increasing interest rates in lieu of higher commissions. It was also when the FCA reminded lenders to review their practices. 
• January 2024: Brought about by a large volume of rejected consumer complaints, the FCA announced a major investigation on commission arrangements. During this investigation period, the FCA will also lift the 8-week deadline for providers to respond. 
• February 2024: The owner of Black Horse Finance - Lloyds- set aside money for the probe amounting to £450M, ensuring they are able to cover the potential cost of the compensation. 
• July 2024: The FCA pushed their timescale on the investigation from September 2024 to May 2025. 
• October 2024: The Court of Appeal ruled against FirstRand and Close Brothers in a test case that involved three consumers.
• November 2024: Santander – another large-scale car dealer set aside £295m for compensation, while Motonovo Finance prepared £209m. On the other hand, Close Brothers has reportedly sold its wealth management unit and is set to prepare a whopping £400m to pay for refunds and compensation to affected consumers
• December 2024: The FCA extended the time given for firms to respond to the PCP complaints that concerned them. Now, they don’t need to follow the December 4, 2025 deadline. While this has extended time for dealers to respond, this has also increased the chances for a potential doubling in the number of affected consumers. 
• May 2025: This is the supposed end date on the timeline of investigating mis-sold car finance, which includes discretionary commissions. 
• December 2025: This is the deadline given for firms to respond to non-DCAs; however, depending on the turnout of events, hearings, and rulings at bay, this may still be adjusted.

Am I Eligible to Claim on Car Finance?

The first step to a claim is determining whether you are eligible for it. There are eligibility criteria that you have to tick off before beginning your claim to ensure you have been mis-sold. Don’t worry as there are a lot of UK drivers who have successfully made their claims and recovered their money after discovering there were unfair terms and hidden fees on their contracts. 

There has been a ballooning rate of claims involving car finance agreements, and if you have purchased an agreement between April 2007 and January 2021, then you’re most likely eligible for a claim. Discretionary commission arrangements have been very common during this timeframe, which explains the increasing number of claims. In response to the concern about commissions, the FCA banned these commissions in 2021. 

Meanwhile, in 2024, the FCA has put an extension to complaints involving any type of commission, whether it be DCAs or other types. This includes undisclosed commissions – a type of commission that is charged to customers without their consent. This follows a Court of Appeal ruling in a test case, which involved three consumers who became victims of mis-sold car finance brought about by undisclosed commissions. On 16 April 2025, the Supreme Court will hear this case and dictate whether compensation should be rightful for more affected consumers. 

Meanwhile, if you’re still confused about whether you should file a claim, here is an overview of the eligibility criteria:

Lack of transparency

The lack of transparency is one of the most common and complained-about issues in car finance. Dealers do not give full information and details about the agreement, which then results in mis-selling. These types of information can vary from commissions to hidden fees and inflated interest rates. Transparency is crucial in a car finance agreement as it ensures that the borrower fully understands the terms associated with the loan. Without clearer and honest disclosure, it may result in unfair agreements. Transparency is needed, especially in the following areas:

1. Interest Rate – Dealers often pull off high interest rates, which are comparatively higher than the ones in the market. The Annual percentage rate should be calculated correctly, and the FCA has special guidelines on this, particularly on PCP agreements.
2. Commission Fees – Commission can bias your lender or broker’s recommendations, especially as this will tickle a personal interest in them. If you were sold an agreement with undisclosed commissions or the commission has significantly affected your agreement and the amount you pay, then you can file for a claim. 
3. Terms and Jargon – When entering a car finance agreement, you should be made familiar with the terms that are used, as this can mean different than what you would think. Your dealer or lender is the one responsible for informing you and educating you on what these jargon means, especially key words like balloon payments and mileage restrictions
4. Early settlement - Should you wish to settle early, you will be allowed to, but there is an agreement that should be taken into consideration when this happens. You have certain rights, and there is a process for early settlement, which you should be aware of. If your dealer did not talk to you about this, then you have been mis-sold. 
5. Voluntary Termination - If you choose to terminate the agreement, then you will be required to pay off a portion of the loan, and this is a right that should have been explained to you by your dealer. Anyone who entered a car finance agreement can have it terminated as long as they follow the correct process. 

Unsuitable Finance Deals

Car finance agreements are made to make car acquisition affordable and achievable at the same time. However, pushing borrowers into high-interest agreements and encouraging long-term deals that result in excessive costs will instead result in unsuitable finance deals. The dealer should explain the contract terms, ensuring you are fully aware of the costs that come alongside your purchase. If not, then the deal may be more expensive than you thought it would be, putting you in financial distress. 

The lack of an affordability check can also be a cause for an unsuitable financial deal. All dealers are required to conduct a financial check to ensure the buyer will be able to afford the agreement offered to them. It will also dictate different variables, such as the interest to be charged and whether you will be granted a certain agreement. Without it, you can file for a claim, as chances are, the agreement offered to you is not suitable for your financial standing. 

Breaches of FCA Regulations or the Consumer Credit Act

All car finance agreements should comply with the regulations of the FCA and the Consumer Credit Act. If your dealer is found guilty of violations and breaches, like failure to conduct affordability checks, misleading sales tactics, and incorrect or incomplete documentation, then you may be eligible to make a claim. Violations like this result in unsuitable agreements, leaving you in unfair situations. However, once proven, lenders may also face irrefutable consequences such as revocation of license and payment of multi-million compensation. 

If you were sold a car finance agreement, then you must review your finance agreement for possible red flags. Check your eligibility for making a claim on your car finance agreement, and look for the above warning signs. 

Determining whether you are eligible is important before filing a claim, as you can immediately know your chances of success.

What are the Common Errors to Avoid When Filing Car Finance Claims?

You may be stressed out after realising you’ve been mis-sold. Most people have doubts about whether filing a claim will be beneficial or will instead just cause more stress. You want to avoid errors when filing your claim because mistakes in the process could delay and weaken your case and even decrease your chances of success. Here are the common pitfalls you should avoid. 

Submitting complete or poorly organised evidence

Your car finance claim needs to have complete and clear documentation, or else it can result in disapproval. This is very basic, but it is also a common mistake a lot of claimants make. Disorganised paperwork and not including copies like proof of payments and lender correspondence will make your claim look weak and, therefore, be outright rejected. It’s important to gather all relevant documents and make sure they're clear and of high quality 

Missing deadlines or misunderstanding the process

Most claimants are unaware of important deadlines like the six- and three-year rule. The six-year rule says you should be able to claim within six years of the finance agreement, while the three-year rule says you should claim within three years of discovering the mis-selling. There is also a six-month deadline of escalation to the Financial Ombudsman Service after rejection from your lender. A tip here is to act quickly and track all the deadlines once you find out about your mis-selling. 

Poorly Written or Vague Complaints

How you argue your case is important as it will be the blueprint of the entire complaint. You must be able to structure it in a manner that is profound and straightforward. Failing to clearly explain how you were mis-sold, as well as failure to identify particularly the undisclosed commission or unfair term, can be a ground for the refusal of your claim. It's also important to reference clearly the key details, such as FCA regulations. Also, do not be emotional, and instead be factual with supporting arguments. 

Not Escalating or Seeking Support When Needed

There are various groups and PCP claim companies that can help claimants address their claims, so you should not give up right away just because you think the process is tedious or because there isn't enough evidence. You should seek support from experts to speed up your case. Also, know that you can still make an appeal should your lender reject your claim. Do not assume that the lender will resolve the issue automatically without making a formal complaint, as these small mistakes can lead to your case’s rejection. 

Apart from knowing how to claim car finance back, avoiding these common mistakes in making a car finance claim can significantly improve your chances of success.

Tips for Gathering Evidence for Your Car Finance Complaint

Keeping your car finance claim well-documented is the key to ensuring you have good chances of winning your case. It's important to have clear evidence of mis-selling, as lenders and regulatory bodies will require it upon checking your claim. Here’s how to collect and present the necessary evidence effectively. 

Collect the key documents

Key documents include the finance agreement, payment records, and correspondence, which are all relevant evidence in making your claim. 

Organise your evidence

A properly organised document is easier to comprehend, especially given the number of cases your lender or the ombudsman will handle. Keep everything in chronological order, and highlight all relevant sections, too. 

Present your evidence cohesively

Write a clear summary of the mis-selling and ensure that all the copies are legible so it appears comprehensible to the reviewer. It’s also a must to submit upfront rather than wait for deadlines. 

Any evidence that will prove you were mis-sold is important and knowing these tips will make the claim process smoother. It’s your evidence that will be the foundation of your case, and it's important to have a strong footing in terms of showing proof. 

Gathering evidence may sound tedious, especially as you have to backtrack all important documents and relevant information about the case. Follow these tips for gathering evidence for your car finance complaint to make it easier for you to complete all required documents. 

After submitting your claim, you can start the post-claims process, which is essential in helping you manage expectations. This can also be beneficial in preparing for the next steps, including possible appeal. Knowing this beforehand will help you become ready for any possible outcome as well.

What Happens After Filing Mis-Sold Car Finance Claims?

Once you’re done with filing your mis-sold car finance claim, you’ll probably wonder what the next step is. A claims process is lengthy and may take months, especially considering the numerous variables that can affect the process. Knowing what comes after the most crucial step in the claim process is equally important to ensure you’re not left behind and that you have your full focus on it. 

Here’s an overview of the process, including what to expect and how to escalate your case if needed.

Initial Review by the lender or the claims handler

After receipt of your car finance claim, the lender or finance provider will acknowledge your complaint, review your agreement, and assess whether it was mis-sold as per the FCA guidelines. This will typically take around 8 to 12 weeks, however, some cases may be longer due to other complexities. 

Potential settlement offers

Should the lender agree with your claim, then you will be offered a refund of all your interests and fees or a just compensation for the financial losses you suffered. Some lenders may also adjust your remaining payment instead. Review this offer carefully, and tap expert help to know whether it is fair and is enough for what you were owed. 

Rejected claim

Not all car finance claims are successful the first time you file them. This is why it's convenient that you have options like requesting a more detailed explanation to understand what caused the refusal of your claim or escalating directly to the Financial Ombudsman Service (FOS). You can also strengthen your case with additional evidence or more proof of mis-selling. 

The claims process takes about six to twelve months in general and can be prolonged by delays and the FOS workload. If your claim is successful, then you’ll be eligible for a claim, but if not, then you can make an appeal. Knowing what happens after filing your car finance claim makes you feel more confident, as you know what to expect. 

Filing a mis-sold claim can raise doubts, and you’ll probably question whether the outcome is worth the amount of hassle. However, it’s a way to keep lenders and dealers who are engaged in unlawful practices like this accountable. With legal consequences as a remedy, it can serve as a deterrent for firms to continue unlawful practices like mis-selling. 

How to Use Ombudsman Services Effectively for Disputes

If there is a financial dispute on your car finance case, such as cases where your lender refuses your claim, or if you’re unhappy with the offer, then you can escalate the case to the Financial Ombudsman Service (FOS) – a regulatory body that can help settle disputes like this. They are an independent body whose role is to resolve complaints between consumers and financial institutions to ensure fair outcomes. 

Regulatory bodies like the FOS help in meddling and solving unfair finance scenarios for consumers

Involving the FOS is recommended in the following scenarios:

• Your lender rejects the complaint
• You think you received an unfair settlement
• The lender did not respond within 8 weeks. 

To save time and improve your chances, you should prepare a strong case, especially when involving the FOS. The FOS has been investigating mis-selling scandals since early 2024, and while there have been solved cases already, the number of new claims continues to rise. Having mistakes on your claims will cause delays that can send your paper to the bottom of the pile again. Initially, the investigation should have been concluded by September 2024 but was extended to May 2025, brought about by numerous factors, like mistakes and reverting due to incomplete documents. Add to this the heavy workload. Start your claim the moment you find out about it. 

Hence, given the circumstances, it’s best to stay professional and concise at all times. 

Here are a few tips to create a compelling case:

• Gather all the relevant evidence, like car finance agreements and correspondence with the lenders. This includes emails, letters, and even phone call records. Bank statements that show payments should also be included.
• Outline your desired outcome and be specific on what you want, whether it be a refund, loan adjustment, or compensation. By doing so, it’ll be easier for the FOS to determine if your request is doable or enforceable.
• State your issue clearly. You should be able to explain thoroughly how you were mis-sold and add all the relevant information that will support your claim. Indicate what happened, when it happened, and how this issue has affected you financially or otherwise.

Escalating your car finance complaint will help if you are unable to resolve your issue directly. After lodging the complaint to the FOS, here’s what to expect:

1. Assessment of Case – The FOS will read your case and inspect if you have a valid claim based on your submitted documents. 
2. Contact with the Lender – Before deciding on an outcome, the FOS can reach out to the lender to ask them to reconsider their stance on your claim. This will make the claim easier should the lender respond and change their stance in your favour.
3. Make a decision – Whether they rule in your favour or not, the FOS will come up with a decision, but it may take several months to know the verdict, as the FOS handles numerous cases, and it’ll also depend on the complexity of your case.

How to Appeal Rejected Car Finance Claims?

A rejected car finance claim can be frustrating, and you’ll feel bad, given the fact that you’ve exerted effort in making your case. Add to that the fact that you are the one who was put in distress due to mis-selling. But it doesn't mean you can’t do anything else. You can still appeal your rejected car finance claim and challenge the decision. Here’s a purview of the process:

• Review the rejection letter and ensure it is clear enough so you will be able to fix it on your end and improve your claims letter. 
• Strengthen your case with additional evidence.
• Escalate to the Financial Ombudsman Service (FOS)
• Consider legal action as a viable option, and tap a claims company for assistance.

Knowing the steps you take in appealing rejected car finance claims will increase your chances of a successful outcome.

Conclusion

Mis-sold car finance has been a growing concern for most UK consumers who have purchased car finance agreements. This car finance scandal has been troublesome for both consumers and lenders. Hidden fees, undisclosed commissions, and unfair contract terms leave consumers financially affected. If you think you have been mis-sold, then it should make you feel more confident now, knowing you have the right to challenge and ask your dealer for compensation.  

Start with reviewing your finance agreement for possible red flags, gather evidence, and file your complaint with the lender. Whether it is accepted or rejected, you can escalate to the FOS for review. While it may take time, you should know that many borrowers were able to successfully make their claims. 

In case you’re unsure whether you are eligible, you could consider asking PCP experts and PCP claims specialists for support. There are PCP claim management companies that offer a no-win, no-fee policy, which is advantageous as you won’t have to pay any fee upfront. Use an eligibility checker or a car finance refund checker to jumpstart the claim process.

Review your finance agreement today, gather evidence, and file your claim to secure the car finance compensation you deserve.