One of the most common questions about the car finance mis-selling scandal is: "How much could I actually get?" The answer depends on several factors specific to your agreement — but this guide gives you a clear framework for understanding the numbers, with real worked examples.
How Is Car Finance Compensation Calculated?
Compensation in motor finance mis-selling cases is calculated based on the difference between what you paid and what you should have paid — specifically, the interest you paid on the inflated rate versus the interest you would have paid on the fair market rate.
The core formula is:
The "fair market rate" is the rate you would have received if the dealer had not exercised their discretion to inflate it. In practice, this is typically 1%–3% lower than the rate you were actually charged — though in some cases the inflation was even greater.
Key Factors That Affect Your Payout
- Agreement size: Larger agreements generate more interest, so the overpayment is proportionally higher
- Interest rate charged: Higher rates mean more overpayment
- Degree of inflation: How much the dealer increased the rate above the fair rate
- Agreement duration: Longer agreements accumulate more interest over time
- How long ago: Older agreements attract more statutory interest (8% per year)
Worked Examples — How Much Could You Get?
| Agreement | Agreement Value | Term | Rate Inflation | Est. Overpayment | + 8% Interest | Total Est. |
|---|---|---|---|---|---|---|
| Small used car (2012) | £5,500 | 3 years | 2% | £330 | ~£370 | ~£700 |
| Mid-range family car (2015) | £12,000 | 4 years | 2.5% | £900 | ~£720 | ~£1,620 |
| Large family car (2018) | £18,000 | 4 years | 2% | £1,080 | ~£560 | ~£1,640 |
| Premium car (2016) | £28,000 | 4 years | 3% | £2,520 | ~£1,900 | ~£4,420 |
| SUV (2019) | £22,000 | 5 years | 2.5% | £2,062 | ~£930 | ~£2,992 |
Note: These are illustrative estimates only. Actual compensation will be determined by the specific terms of your agreement and the outcome of the FCA's redress scheme. The statutory interest figures above assume payment by late 2026.
The 8% Statutory Interest — Why It Matters
Under UK law (and as applied by the Financial Ombudsman Service), compensation awards include 8% simple interest per year from the date of the original overpayment. This is separate from and in addition to the principal refund amount.
Why does this matter? Because many of the agreements under review are over a decade old. An overpayment of £1,000 from 2013 would attract approximately £1,040 in statutory interest alone — more than doubling the total payout. This is why older agreements can be worth significantly more than newer ones of the same value.
What About "Total Rescission"?
Following the Court of Appeal ruling in Johnson v FirstRand Bank, there are now two potential remedies available to claimants:
- Partial redress: A refund of the commission element plus statutory interest — this is the standard FCA approach
- Total rescission: Full unwinding of the agreement, meaning all interest paid is refunded, plus the possibility of recovering any other losses — this is the more aggressive route and is more likely to apply where the Court of Appeal's fiduciary duty reasoning is upheld by the Supreme Court
If the Supreme Court upholds the Court of Appeal's reasoning, claimants could receive significantly more than under the partial redress model. MotorRedress will pursue the highest available outcome for each client.
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Check My Eligibility FreeWhich Lenders Are Paying Out the Most?
Compensation amounts are not lender-specific — they are based on the terms of your individual agreement. However, some lenders have larger provisions and may process claims faster once the FCA scheme is live. See our full lenders guide for a comparison of provisions and what to expect from each lender.
Major provisions include: Black Horse (Lloyds) — £1.95bn, Close Brothers — £400m, Santander — £295m. These figures reflect the scale of the issue and the number of affected customers.
Will You Pay Tax on Your Compensation?
The principal refund element (the overpaid interest) is not subject to income tax. The statutory interest element (8% per year) is treated as savings income and may be subject to income tax — but most people will be within their Personal Savings Allowance (£500 for basic rate taxpayers, £1,000 for basic rate taxpayers in 2025/26 tax year). HMRC typically handles any tax due automatically; you do not need to take any action in most cases.
Also useful: How to Check If You're Eligible for a PCP Claim.