Why the Car Finance Supreme Court Decision Is a Game-Changer
If you’ve ever considered financing a car in the UK, there’s a landmark court ruling you need to know about: the Supreme Court’s decision on discretionary commission structures. It’s reshaping how car loans are sold, what protections you have, and potentially what you owe. Let me walk you through what happened—and why it matters for anyone thinking about borrowing for a car.
What Was the Case About?
In mid-2025, the UK Supreme Court weighed in on a contentious issue: car dealers setting interest rates based on commissions from lenders, without always making that clear to consumers. These discretionary commission arrangements meant that the higher the interest rate offered to a borrower, the more a dealer or broker could earn. Three customers challenged similar agreements—Hopcraft, Wrench, and Johnson—arguing they hadn’t been informed of those commission incentives and had essentially been offered a single, worse-rate option.
When it got to the Supreme Court, two of the three claims were dismissed—but Johnson’s case was upheld. His deal involved a staggering 55% commission, combined with wording in documents deemed misleading under the Consumer Credit Act, which made it unfair. In his case, compensation was awarded. The broader fallout, however, is profound: the Court rejected the idea that all commissions or non-disclosure inherently mean mis-selling. Still, where those practices created clear unfairness, redress remains possible.
How This Could Affect Your Next Car Loan
This ruling doesn’t just look backward—it also sets the tone for how car loans will be arranged going forward.
Transparency and disclosure are now mandatory
Dealers and lenders must clearly outline how your interest rate is set, and whether anyone involved earns commission on that. Gone are the days of vague small print saying “APR may vary.”
Interest rates may become fairer and more consistent
Without the incentive to push borrowers into higher rates, there’s a good chance that consumer offers will become more competitive and less variable.
Consumer protection is being strengthened
The Financial Conduct Authority is taking a closer look at these structures, with the power to introduce new standards for how loans are advertised and sold. It’s a shift toward clearer, fairer practices in the industry.
Compensation for past borrowers is real, for some
Customers who agreed to deals before 2021 that involved high undisclosed commissions, and where the structure worked against them, may be eligible to reclaim some of what they paid.
What About Existing Finance Agreements?
If you’re currently paying off a car loan, it’s worth taking action:
- Review your agreement for any mention of commission structures or variable rate mechanisms.
- If you suspect you were offered a higher rate due to undisclosed commission, consider contacting your lender to clarify.
- The Financial Ombudsman Service and consumer advocacy groups are fielding more complaints related to these agreements. In some cases, seeking legal advice might be beneficial.
Although most claims were dismissed at the Supreme Court level, the Johnson case shows that compensation is still possible where unfairness is clear and undisclosed. Regulators are reviewing previous complaints as well as ongoing submissions. If you received a single loan offer without transparency, especially before 2021, you may still have a case.
Impact on the Car Finance Industry
This ruling sends a clear message to lenders and dealers: you need to clarify how finance deals are structured, or risk regulatory action and loss of trust. Though the Supreme Court didn’t accept every claim, it confirmed that certain agreements crossed legal thresholds of consumer fairness.
Expecta change in training and sales practices
Dealerships are being urged to train sales staff in greater transparency: how rates are calculated, whether commission is involved, and what other options exist.
Advertising will evolve
Watch for clearer disclaimers around interest rates and fee structures, especially in promotional materials.
Online and direct finance platforms may gain ground
Their simplicity and clarity could make them more appealing, as consumers increasingly expect straightforward lending terms.
Dealers that relied heavily on commission-based deals may need to re-evaluate, while buyers will have more options in the marketplace.
Looking Ahead: What Car Buyers Should Do Now
Planning to finance a car soon? Here’s how you can navigate the new landscape:
- Ask the right questions upfront
How is the interest rate determined? Does a commission influence the rate? Are there multiple lenders you can compare? - Shop around
Don’t rely solely on dealership finance. Compare offers from banks, credit unions, and online lenders for clearer terms. - Keep thorough documentation
Save quotes, email exchanges, finance agreements—even screenshots of online offers. If a claim becomes relevant later, this will be invaluable. - Be cautious of claims companies
Some charge high fees (25–30% of any refund) and may tell you redress isn’t available without them, often untrue. Regulators are watching these firms more closely. - Stay informed about regulatory updates
The FCA is reviewing its position and may issue new guidance—knowing your rights as changes emerge will help protect your position.
Closing Thoughts
This Supreme Court decision is a watershed moment for UK car finance. While it didn’t upend the system entirely, it confirmed that consumer fairness matters—and in clear-cut cases, redress is possible. For borrowers, it means a fairer environment with more information and fewer hidden costs. For lenders and brokers, it’s a wake-up call to adapt and act transparently.
Whatever stage you’re at—from considering finance to feeding back complaints about past deals—this is one of the most significant rule shifts in the car finance world in years. It brings clarity, accountability, and a better chance for ordinary consumers to make informed decisions. The landscape feels different now, and for the better.
FAQs
What happens if I can’t pay my car finance in the UK?
Missed payments can lead to repossession, but most lenders will first try to agree on a revised payment plan.
Is car finance halal?
Standard car finance involves interest, which isn’t permissible under Islamic law, but Sharia-compliant options like Ijara or Murabaha avoid interest.
Does car finance affect credit score in the UK?
Yes—on-time payments help build credit; missed or late payments damage it and can impact future borrowing.
What happens if I buy a car with outstanding finance in the UK?
If the car still has a finance attached, you risk it being repossessed by the lender, even if you paid the seller.
Can I stop my car from being repossessed in the UK?
Potentially—by negotiating with your lender or applying to the court for a Time Order to delay repossession.
If you’re looking for more information on car finance options in UK, be sure to check out our website for expert advice and the latest deals.
