Car Finance in the Spotlight: The Supreme Court's Big Test
If you’ve financed a car in the UK in recent years, here’s something that might stop you in your tracks: a Supreme Court decision set for August 1, 2025, could lead to billions in compensation for motorists. The reason? Car dealers have been pocketing chunky commissions from lenders on nearly every finance deal—often without telling you.
This all kicked off when the Court of Appeal ruled last October that it’s not just a sneaky business move, but outright unlawful for dealers to get these payments without your clear consent. Now, the spotlight is on lenders like Close Brothers and Motonovo. Both are fighting to overturn that decision, because depending on what the Supreme Court says, they could be on the hook for a potential £30 billion in paybacks to car buyers—talk about high stakes.
So what’s at the heart of this? When you walk into a showroom and are offered a finance deal, the dealer is almost always acting as a credit broker. What you probably didn’t realise: about 99% of these deals see the dealer earning a commission, sometimes as much as a quarter of your total interest payments. In most cases, customers had no clue about these kickbacks, which seriously blurs the lines about whether the deals were fair—or even legal—under the rules set out in the Consumer Credit Act 1974.
What Happens Next? Watch This Space
The Financial Conduct Authority (FCA) is already preparing. If the Supreme Court backs the previous ruling, the FCA says it’ll roll out a big compensation scheme within about six weeks. Their advice? Hold off signing up with those claims management firms waving flashy ads—these guys take big fees, and there’s a free route coming if you’re eligible for a payout.
But it’s not just about refunds. Money expert Martin Lewis, who regularly helps Brits squeeze the most out of their money, is warning that the ripples from this decision could go way beyond car finance. Lenders, spooked by a possible payout tsunami, might start tightening up on all sorts of loans—so getting credit for anything from a holiday to a house deposit might get tougher and more expensive.
It’s got policymakers sweating, too. Chancellor Rachel Reeves and her team are reportedly looking at whether new laws might be needed to stop the car finance industry—or the wider banking sector—from taking a hit so big it knocks confidence in UK lending. If Parliament steps in, it could cap the amount lenders have to pay out or change how these commissions are handled for future deals.
This legal fight is about more than just cars. If the Supreme Court rules against the lenders and dealers, any consumer finance product that includes an undisclosed commission could come under fire. Mortgages, insurance, even those ‘buy now, pay later’ offers at your favourite shops might need stricter rules on telling customers where the money’s really going.
For now, motorists just need to sit tight. If you’ve bought a car on finance since 2007, you could be due a payout—but wait for the official FCA scheme for a fair shake. Either way, August’s decision is set to shake up the way banks, car dealers, and credit brokers nationwide do business. The question everyone’s asking: will more transparency finally become the new ‘normal’?
