Car finance customers kept in the dark over secret commissions 

Consumer Voice investigation uncovers significant new findings ahead of a key court decision over the mis-selling of car finance loans

New research from Consumer Voice uncovers evidence that dealers are not always telling customers about the commission payments they receive from lenders for arranging their loans. 

Consumer Voice surveyed 2,050 people who had car finance loans arranged by their dealer to probe whether they were made aware of key information that could affect their borrowing decision – including the total commission paid to car dealers and how it was calculated.

Over four in ten (44%) people who took out a loan in the past four years didn’t know whether their dealer received commission for arranging their finance deal – and only 5% said they were sure no commission was paid.

This makes it impossible for them to know whether they got a good deal. A concern given that only 4% of car finance customers said they researched other options before negotiating a better price with their dealer – and 67% of people took the deal on the spot. 

Car finance customers should be clearly told how much commission dealers will earn, and agree to it. Most people are not told about commission arrangements ahead of signing a deal – only 28% said they agreed to commission before signing a deal. 

Of these, over half (56%) said they had to ask for this information. These more savvy customers tend to be better educated, and are more familiar with buying and using financial products. Only a third (34%) said the information was volunteered by the dealer.

A surprising quarter (23%) of motorists we surveyed said they discovered commission was received by their dealer after they had signed their agreement. 

Alex Neill, co-founder of Consumer Voice, said:

‘Consumers have a right to expect car dealers to act as honest brokers. People trust their car dealer to act in their best interests when arranging finance. 

‘Yet, this trust is clearly being abused by some dealers in the market. It is the responsibility of the dealer to ensure that car buyers both know of and agree to a commission payment. 

‘And being transparent and upfront about commission payments doesn’t include it being buried in the fine print of a raft of documents the consumer has no chance of reading.’

A Court of Appeal ruling in October made it clear it is unlawful for car dealers to gain commission from lenders without receiving the customer’s fully informed consent to the payment. This decision could open the door to a fresh wave of complaints from motorists seeking compensation for mis-sold car finance in previous years.

In April, the UK’s highest court, the Supreme Court, will decide whether to uphold this landmark ruling on hidden motor finance commission arrangements. 

When you took out your car finance, how much did you agree with the following statements?

Financially unsophisticated consumers left without a choice 

Consumers who enter a car dealership are focused on one outcome – buying a car at a reasonable price with affordable monthly payments. They rely on car dealers to get them a good deal. 

People we surveyed typically expected their car dealer to only make money on the sale of their car – not from commission for arranging finance. Six in ten (60%) of our motorists think this to some degree, including 22% who strongly agree. Only 16% disagreed.

Most car finance customers (67%) also said they trust their car dealer to offer them a competitive finance loan based on their needs – for instance, a loan with monthly payments they can easily afford. Only 8% don’t think this.

A quarter (24%) of people showed uncertainty about this, and it’s easy to understand why as most people don’t have the ability to build up their experience or knowledge in this area. 

Nearly half (48%) of people in our survey have experience of taking out only one car finance loan arranged by their car dealer. As such they must be treated as relatively unsophisticated consumers when entering into this type of transaction.

‘Not declaring a commission preys on consumers who are made vulnerable by this information asymmetry,’ added Neill.

‘It gives car dealers an imbalance of power in this transaction and removes any opportunity for the customer to even consider shopping around for a better deal.’ 

Of the 1,675 people who had arranged loans in the past four years, nearly half (48%) were only offered one loan option by their dealer. Just over a third (36%) said they were offered two, and less than one in ten (9%) said they were offered three or more options.

Only a quarter of people (24%) went away to consider the deal before taking the deal offered – and a further 6% said they went away to consider the deal and negotiated a better price before taking it.

A third (32%) said they took the deal they were offered on the spot and a third (35%) said they negotiated a better price on the deal and then took it on the spot. A tiny 4% of customers said they researched other options before negotiating a better deal. 

Consumers are clearly feeling the pressure to take the deal on offer. Half (50%) of all people completing our survey said they thought the cost of their car was dependent on taking a car finance loan from their dealer. 

Millions of motorists could be eligible for compensation

While the industry waits to see whether the Supreme Court upholds or overrules the Court of Appeal judgment, the financial regulator is separately investigating whether there was widespread misconduct in the car finance market, and if so, how affected consumers should be compensated. 

The problem the regulator is investigating dates back to before January 2021 when some car finance lenders allowed dealers to set or adjust the interest rates they offered customers for car finance. 

Car dealers were paid higher commission – known as a ‘discretionary commission arrangement’ (DCA) – by lenders if they arranged a higher interest rate with their customers. 

This gave them an incentive to increase how much people were charged for their car loan.

The Financial Conduct Authority, in a letter to the Supreme Court, estimated that almost 99% of the roughly 32 million car finance agreements between 2007 and 2021 involved a commission payment to a broker.

Yet, awareness of this practice, which was banned by the FCA in January 2021, is still woefully low. Of the 375 people in our survey who had taken out car finance loans before the ban, four in ten (44%) are not aware of DCAs – only one in ten (11%) said they were very aware.

But, once in the know, consumers are enraged by the practice – with only one in ten people (9%) saying they are not at all concerned about car dealers being paid higher commission if they arrange for their customers to pay a higher level of interest on their loans.

And there is still considerable uncertainty about whether car deals involve a discretionary commission arrangement, despite the widespread publicity around the problem. Seven in ten (69%) didn’t know. Only 18% said they knew their loans involved discretionary commission and 13% they were confident they didn’t.

Were you mis-sold your car finance?

Consumers are rightly concerned about secret commission deals and should be compensated for any rule-breaking. People could be in line to claim on average £1,100, based on a four-year £10,000 motor finance loan.

More than seven in ten people (72%) who know their agreements are based on DCAs said they would claim compensation if and when it becomes available – with 46% saying they would be extremely likely to and only 16% said they were unlikely to.

Those who haven’t yet had DCA loans confirmed (69%) were just as likely to claim compensation if they discovered they too had been affected – although most (82%) have yet to contact their lender to ask this question.

For now, anyone who bought a car before the FCA banned the use of discretionary commission in January 2021 should contact their lender or dealer to ask whether there was any commission arrangement in place when they took out their loan.

Download our free template letter if you suspect the interest you agreed on a car loan was too high.

Growing concern over unfair secret deals 

The Court of Appeal ruling relates to fixed commission in car finance agreements as well as discretionary commission arrangements, and could lead to a surge in even more customers who have bought car finance before and after the FCA ban claiming compensation.

Only 21% of customers said they were very aware that some car dealers receive commission or a fee from lenders for giving them business. Yet, this is another sneaky practice that people are concerned about – with more than eight in ten (84%) people showing some degree of concern and a quarter of people (24%) expressing the highest levels of concern. Only 16% were not concerned at all.

Over half of these car loan customers (55%) said they would claim compensation if it was available and they knew they were eligible – only 6% said they were extremely unlikely to.

But, like with deals involving discretionary commission, not enough people currently know whether or not their dealer received commission for arranging their loan. Despite the regulator’s rules clearly stating this information should be disclosed.

More than four in ten (44%) people who took out a loan in the past four years don’t know whether their dealer received commission for arranging their finance deal – and only 5% said they were sure no commission was paid.

Car finance customers should be clearly told how much commission dealers will earn, and agree to it – yet, we found 67% were not told upfront about the possibility of commission. This includes a quarter (23%) only discovered commission was received after they had signed their agreement.

Just under a third (28%) said they agreed to commission before signing their contract, but over half (56%) said they had to ask for this information. These more savvy customers tend to be better educated, and are more familiar with buying and using financial products. Only a third (34%) said the information was volunteered by the dealer.

Consumers denied the choice to shop around 

Doing your research and shopping around is something most of us have good intentions to do but the reality can be somewhat different – as we saw in our survey, only 4% said they did this.

But the choice should be there for people to do this. Nearly half (49%) of those people who found out about commission arrangements too late or didn’t know about it at all said they would have considered shopping around for a better deal if they had known their car dealer was receiving commission from a lender. Only 3% said they were extremely unlikely to shop around.

‘Car dealers and lenders know that the vast majority of people don’t shop around for their car finance – and most people told us they agreed to the deal on the spot,’ added Neill. 

‘This makes it even more important that dealers are transparent and upfront about the existence of commission payments and exactly how much they stand to gain.’

‘Lenders are equally to blame for the lack of transparency in this market and should have ensured dealers were giving consumers all the key information.’ 

It’s also worth remembering that you have a legal right to cancel a car finance agreement within 14-days of taking it out without having to pay penalties. Although more than 8 in 10 (85%) say they were aware of this, only 7% had exercised this right.

Research from Consumer Voice

We conducted an online survey of 2,050 people who had taken out car finance loans arranged by their dealer – both before the 2021 ban (375) and after the 2021 ban (1,675). The survey was carried out with UK adults between 10-15 January 2025.

Consumer Voice is free use, independent and we tell consumers when the companies they buy from have broken the law. We help people easily work out whether they’re entitled to compensation and how to claim. Sign up to our newsletter to stay updated on claims that could leave you owed compensation.