Car finance: what’s next for consumers in 2026?

Most drivers want to use the financial regulator’s car finance redress scheme but will go to court if compensation is too low

As 2026 begins, the direction of travel on car finance is becoming clearer. The regulator has set out how its landmark motor finance compensation scheme could work. Consumers want a regulator-led approach, but many say they will go to court if compensation is too low.

Consumer Voice research makes the message clear. Most people would rather use the Financial Conduct Authority’s redress scheme than head straight to court. But that willingness has limits. If the compensation on offer falls short, support quickly disappears and many are ready to take legal action.

The stakes for the regulator could hardly be higher. A scheme that under-compensates risks not only repeating the original injustice, but triggering exactly the outcome the FCA says it wants to avoid: large numbers of consumers turning to the courts.

Consumer Voice co-founder, Alex Neill, said:

“Consumers are willing to use the regulator’s redress scheme, but they won’t accept being short-changed. If the FCA fails to deliver a scheme that properly compensates people, many drivers will feel they have no choice but to go to court to get what they are owed.”

For the scheme to work, it must be simple, inclusive and fair. It must not minimise payouts or put the burden on people already let down by the industry. The consultation takes some positive steps, but serious risks remain.

If you took out car finance between 2007 and 2024, now is the time to complain. Doing so puts you at the front of the queue and ensures your case is on record. Use our free tool for template letters and alerts to guide you through the process.

Consumers prefer the scheme until it leaves them worse off

Consumer Voice research shows that around eight in ten consumers would choose to use the FCA’s redress scheme rather than go straight to court, with many saying they would want legal support to help them navigate the process. Only a small minority say they would opt for litigation instead of the scheme from the outset.

But that picture changes dramatically if compensation under the scheme is lower than what could be achieved through legal action.

Almost everyone surveyed said they would be prepared to go to court if it meant receiving more compensation than the scheme would provide. For many, the difference does not need to be enormous. While some said they would need a significant uplift to justify legal action, others said that any meaningful increase on the FCA’s offer would be enough.

The implication is clear: a redress scheme that systematically underpays will not deter claims – it will redirect them.

Awareness is high, but trust is low

Public awareness of the car finance scandal is already widespread. Most people know they may be owed compensation, and many are aware that the FCA is planning a redress scheme. A large majority say they would be likely to claim if they are eligible.

Yet relatively few people have actually complained so far.

Low trust in lenders appears to be a major barrier. Only a tiny proportion of consumers believe lenders would provide clear and impartial information about compensation. Many people are unsure whether to complain now, wait for the scheme, or risk missing out altogether.

That uncertainty matters. The longer people feel unable to act with confidence, the greater the risk that a complex or restrictive scheme will leave large numbers of consumers behind.

Why the design of the scheme now matters

The FCA has been clear that its aim is to deliver a fair, efficient alternative to mass litigation. That goal is widely supported. But Consumer Voice has warned that, as currently proposed, the scheme risks falling short unless key changes are made.

In particular, there is a real danger that consumers receive less than the true value of the harm they suffered – through narrow eligibility rules, conservative assumptions in the compensation formula, and an interest rate that does not reflect the real cost of being deprived of money.

If that happens, the logic for many consumers will be simple: accept an inadequate payout, or test their case in court.

That is why Consumer Voice is calling on the FCA to strengthen the scheme while there is still time to get it right. Last month, we set out in detail what needs to change, including the case for automatic inclusion, fairer compensation, and stronger oversight.

If you took out car finance, don’t wait

One point matters above everything else as we move into 2026: if you have not yet complained about your car finance agreement, now is the time to do it.

Making a complaint now helps protect your position and ensures your case is on record, whatever form the final redress scheme takes. It also reduces the risk of consumers being forced into rushed decisions later, when deadlines and rules are fixed.

Consumer Voice has created a free tool with template letters to help you complain and a guide to help you understand what to do next.