Motor Finance
Car Finance Claims: Hidden Commissions in Car Finance Agreements — Are You Owed Compensation?
Millions of UK consumers may have been overcharged due to undisclosed commissions in car finance agreements — including one Black Horse case where 47.83% of the loan value was paid as hidden commissions.
What Is a Mis-Sold Car Finance Agreement?
A mis-sold car finance agreement occurs when crucial details — like commission structures — are hidden from the customer. Many UK consumers entered into finance agreements with inflated interest rates, not realising that significant portions of their loan payments were going toward undisclosed commissions for brokers or dealers.
Two Key Types of Commission Models:
- **Discretionary Commission Models** — dealers manipulated interest rates to increase their commission.
- **Fixed Commission Models** — commissions were calculated as a percentage of the total loan amount, incentivising dealers to inflate loan sizes with add-ons or extras.
Shocking Examples of Mis-Selling
Santander Case:
On an £81,000 Land Rover finance agreement, nearly 20% of the loan amount went to commissions:
- £9,781.09 in scale commission (12% of credit)
- £4,279.23 in head office commission (5.25%)
- £1,988.82 in outcome bonus (2.44%)
Black Horse Case:
In another example, a loan of £4,595.05 included £2,197.65 (47.83%) in commissions. Despite the consumer's loan appearing straightforward, nearly half the loan's value was paid to the dealership and lender as commissions.
Why Fixed Car Finance Commissions Are Just as Problematic
While discretionary commission models have received significant scrutiny, fixed commission models are equally damaging. In a fixed model, commissions are tied to the loan amount, incentivising dealers to:
- Add extras like paint protection, extended warranties, or GAP insurance.
- Roll in negative equity from a previous car loan.
- Push consumers toward higher loan amounts rather than fair terms.
The FCA has recently announced they will investigate fixed commission models, which have gone under the radar for years.
How to Check If Your Car Finance Was Mis-Sold
1. Review Your Agreement — look for terms that mention commissions, interest rates, or add-on products. 2. Calculate Total Costs — compare the loan amount to the total payable. Large differences may indicate excessive commissions. 3. Look for Signs of Mis-Selling — were you informed about commissions? Did the dealership push additional products? 4. Contact Sentinel Legal — our team can review your agreement and determine if you have a claim.
Why Choose Sentinel Legal?
As the UK's leading experts in car finance claims, Sentinel Legal has:
- Issued over 900 claims in court, making us the largest litigator in the country for motor finance claims.
- Uncovered hidden commissions across major lenders like Santander, Black Horse, and more.
- Secured millions in compensation for consumers.