For years, drivers across the UK have been holding out hope for compensation after discovering they might have been misled into expensive car finance deals.
But now, in a major twist, the Supreme Court has dashed most of those hopes—delivering a ruling that favours the lenders and puts a serious roadblock in front of millions of potential payouts.
Why Motorists Were Hoping for a Big Win
It all started with claims that car buyers were being unknowingly charged more due to secret commissions.
Essentially, lenders were paying brokers or dealers to get people to sign up for car loans.
But here’s the catch: in many cases, customers didn’t know these commissions even existed—let alone that they might’ve pushed interest rates up.
Last year, the Court of Appeal ruled that these hidden commissions, particularly in deals made before 2021, were unlawful.
That ruling set the stage for a potential £44 billion wave of compensation claims.
Many drivers thought they were about to get back thousands in overpaid interest.
Supreme Court Says “Not So Fast”
The finance companies weren’t having it.
Major players like Lloyds, Close Brothers, and Santander fought back, and the matter ended up in the hands of the Supreme Court.
The final decision came down late in the afternoon—deliberately timed after the markets closed to avoid causing financial panic.
Supreme Court President Lord Reed made the announcement: the appeals from the finance companies were allowed.
While one particular customer’s claim was upheld—meaning they’ll get back their commission plus interest—most others were rejected.
In short, for the vast majority of drivers who were hoping for financial redress, the answer is: not anymore.
Could Some Drivers Still Get Compensation?
It’s not all over just yet. There’s a glimmer of hope coming from the Financial Conduct Authority (FCA).
While the Supreme Court addressed the legality of hidden commissions, the FCA has been running its own investigation into something called “Discretionary Commission Arrangements” (DCAs).
This is where brokers could increase interest rates to boost their own commission.
In these cases, a driver could’ve unknowingly paid hundreds—or even thousands—more on their car loan than necessary.
The FCA believes these kinds of arrangements cost motorists around £165 million per year before they were banned in 2021.
FCA Could Still Launch a Redress Scheme
The big question now is whether the FCA will step in with a formal redress scheme.
They’ve been investigating since January 2024, and we’re expecting a decision in six weeks.
If they decide widespread harm was caused, a redress scheme could mean drivers get compensated without needing to go through the courts or hire expensive lawyers.
This could be the next major chapter in the car finance saga—and for some people, it might be the only route left to get their money back.
How the Commission Worked Behind the Scenes
So, what actually happened with these car finance deals?
Around 90% of new cars in the UK are bought using finance deals.
Buyers would pay a deposit and borrow the rest from a lender, then repay the loan in monthly instalments.
However, in the background, lenders were incentivising brokers and dealerships with commission.
And sometimes, to get more money, these brokers would agree to hike the interest rates—meaning the customer unknowingly ended up with a worse deal.
For example, someone borrowing £10,000 over four years might have paid up to £1,100 more than necessary—just so the dealership could pocket more commission.
Industry Insists It Did Nothing Wrong
Finance companies and brokers maintain they weren’t doing anything illegal.
And now with the Supreme Court ruling in their favour, they’re breathing a massive sigh of relief.
Close Brothers and FirstRand Bank were two of the lenders who challenged the original Court of Appeal decision.
Their win at the Supreme Court likely saved the industry billions in potential payouts.
Consumer Trust Takes a Hit
Despite the legal win for lenders, consumer confidence in the car finance industry has taken a beating.
According to Greg Huitson-Little, a partner at Menzies LLP, the complexity and lack of transparency in car finance deals have left customers confused and misled for far too long.
He pointed out that terms like “dealer contributions,” “rentals,” and “guaranteed future values” only served to muddy the waters—making it harder for people to understand the real cost of their purchase and their loan.
What This Means Going Forward
Even though the Supreme Court ruling has closed the door on most legal claims, the bigger picture is clear: the car finance industry is under pressure to change.
Experts are calling for a complete overhaul in how finance deals are structured and communicated.
That includes clearer terms, full disclosure of commission arrangements, and treating car finance for what it is—a loan, plain and simple.
There’s also a growing sense that the days of backdoor “deals” and secret commissions need to end, once and for all.
When Will We Know More?
The next big moment comes in six weeks, when the FCA is expected to reveal whether it will move ahead with a redress scheme.
Until then, drivers who feel they were misled are left in limbo—waiting to see if they’ll ever get a refund.
In the meantime, this ruling will no doubt be seen as a win for the banks, but also a major setback for consumer rights.
Bottom Line
While the Supreme Court has offered closure to the legal debate—for now—it hasn’t closed the case entirely.
If the FCA decides there was widespread consumer harm, the car finance industry could still be forced to pay up.
And for many drivers, the fight for transparency—and possibly justice—continues.