What Is a PCP Claim and Am I Eligible?

Millions of UK motorists may have been mis-sold their car finance without ever realising it. If you took out a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement between 2007 and 2021, there is a reasonable chance you were charged more than you should have been — thanks to hidden commissions that were not disclosed to you at the time.

This guide explains what a PCP claim is, who is eligible, and what to do next.

What Is PCP Finance?

Personal Contract Purchase is one of the most popular ways to finance a new or used car in the UK. Under a PCP agreement, you make monthly payments over a fixed term (typically two to four years), then have three options at the end: hand the car back, pay a final 'balloon' payment to own it outright, or use any equity as a deposit on a new agreement.

PCP is different from outright purchase or a traditional loan — your monthly payments are lower because you are not paying off the full value of the car. Instead, you are paying for the depreciation over the term.

What Is HP Finance?

Hire Purchase is simpler: you pay off the full value of the car (minus any deposit) in equal monthly instalments. At the end of the agreement, you own the car outright, with no balloon payment required.

Both PCP and HP agreements were affected by the hidden commission practice that is now under investigation.

What Went Wrong?

Between 2007 and 2021, many car dealerships used a system called a discretionary commission arrangement (DCA). Under this system, the dealer could set — or 'flex' — your interest rate within a range set by the lender. The higher they set your rate, the more commission they earned.

This created a direct conflict of interest: the dealer was incentivised to charge you as much interest as possible, rather than finding you the best deal. Crucially, this arrangement was almost never disclosed to consumers. You agreed to a finance deal without knowing that the person sitting across from you had a financial incentive to charge you more.

The Financial Conduct Authority (FCA) investigated this practice and found it was widespread across the industry. It banned discretionary commission arrangements in January 2021.

Why Can You Claim Compensation?

The basis for claiming compensation is that you entered into a credit agreement where the broker (the dealer) had an undisclosed conflict of interest. Under the law, lenders and brokers have a duty to act in your best interest and to disclose any arrangements that might affect the advice or deal you receive.

Because DCAs were not disclosed, courts and regulators have found that consumers who were subject to them may be entitled to a refund of the excess interest they paid — essentially, the difference between what they were charged and what they would have paid under a fair arrangement.

Who Is Eligible to Claim?

You may be eligible if:

• You took out a PCP or HP car finance agreement with a UK lender
• The agreement was taken out between 6 April 2007 and 28 January 2021
• The car was purchased through a dealership (rather than a direct lender)
• The interest rate on the agreement may have been set by the dealer rather than fixed by the lender

The type of vehicle matters less than you might think. The investigation covers cars, motorbikes, and vans. You can claim even if:

• You no longer own the vehicle
• You have fully paid off the finance
• You part-exchanged or handed the car back
• You had more than one agreement (you can claim on each)

What Are You Claiming For?

The claim is for the excess interest you paid as a result of the dealer's commission arrangement. The FCA has estimated that average compensation under a proposed redress scheme will be around £700 per agreement, though individual amounts can be significantly higher or lower depending on:

• The size of the loan
• The interest rate applied
• How long you held the agreement
• Whether there was a DCA or other form of undisclosed commission

Can I Claim for Free?

Yes. You are always entitled to pursue a claim directly with your lender, free of charge. You can also refer your case to the Financial Ombudsman Service (FOS) if the lender does not resolve your complaint to your satisfaction.

Using a claims management company (CMC) like The PCP Team means you benefit from specialist expertise and have your case managed for you — but a success fee will apply if compensation is recovered. This fee reduces the net amount you receive.

What Is the FCA Doing?

The FCA launched a formal review of motor finance commission arrangements in January 2024. It found widespread evidence of the practice and has been consulting on an industry-wide redress scheme that would require lenders to compensate affected consumers, potentially automatically.

As of early 2026, the scheme has not yet formally opened, but the FCA has made clear it expects lenders to compensate consumers fairly. The Supreme Court's ruling on the legality of secret commissions — expected in late 2025 — is also set to shape the final scope of the scheme.

How Do I Check If I Have a Claim?

The simplest step is to use The PCP Team's free online eligibility checker. It takes under two minutes. You'll need to know:

• The approximate date your finance agreement started
• The name of the finance company (not the car dealer)
• The type of vehicle

If you don't have this information to hand, your lender is required to provide it on request — and we can help you obtain it.

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The PCP Team is a trading style of Credit Claim Assist Ltd, authorised and regulated by the Financial Conduct Authority for claims management activity (FRN 832480). You are not required to use a CMC to pursue a claim.