Martin Lewis explains the latest update on 'unprecedented' car finance compensation

Martin Lewis, who founded MoneySavingExpert.com, has provided his thoughts on the car finance compensation scheme, explaining which individuals might be eligible for it.

Martin Lewis has shared his thoughts on the car finance compensation scheme, detailing who might be eligible for compensation as a result of mis-sold car finance agreements.

Approximately 12 million car finance agreements are believed to have been mis-sold, with the Financial Conduct Authority (FCA) recently releasing details of a long-awaited redress scheme.

It is estimated that the average payout will be £829, although the actual amount will vary depending on individual circumstances, with the total amount expected to be paid out being £7.5 billion - a decrease from the previously estimated £8.2 million.

There will be two separate redress schemes in place: the first will cover mis-sold car finance agreements between April 6, 2007, and March 31, 2014, while the second will cover agreements between April 1, 2014, and November 1, 2024.

You may be eligible for compensation if your car finance agreement had a discretionary commission arrangement, a high rate or commission, or a contractual tie that you were not properly informed about.

In his analysis, Martin Lewis described the payout scheme as 'unprecedented', explaining that companies will be required to actively identify everyone who was mis-sold and provide them with their compensation.

However, Martin Lewis explained that individuals who submit a complaint themselves will receive their compensation more quickly, and the FCA has encouraged those who may be affected to submit a complaint to the lender that provided the car finance.

Martin Lewis has warned people against using a claims management company or law firm, as these will take 30% of any compensation owed to them.

Martin Lewis stated: 'So what type of things are included here? It's quite strict. It's motor vehicle finance, car, van, camper van, motorbike. Not caravan because it doesn't have a motor.'

He continued: 'It's specifically PCP or HP finance, not leasing. And it's between 6 April 2007 to 1 November 2024. So if you had one of those and you haven't complained, you want to complain.'

He added: 'Now, it's not saying you'll all get a payout. 35% of those policies, it's thought, were mis-sold under the regulator's definition.'

He further explained: 'But the important thing to understand is one of the big things that means you were mis-sold is it did one of three different forms of mis-selling. I'll go into those a bit later...'

He concluded: 'But it didn't tell you what it was doing. It didn't disclose it to you. So the only way you can know if you were mis-sold, the only way you can know if you've got a complaint, is to complain, which is why I'm suggesting you get your complaint in now so that you can find out.'

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