Common sense has triumphed over compensation culture
It cannot be overstated how significant this ruling was — and how relieved Rachel Reeves will be.
An enormous redress scheme — which could have opened the floodgates to compensation claims worth up to £44 billion — would have seriously tarnished the reputation of our financial services industry. It would also have made Britain a less desirable place to invest and damaged the growth that we so need.
Yet ultimately it would have been you, the consumer, footing the bill through higher interest rates.
The investigation into car finance mis-selling was initially focused on drivers whose car dealer had increased their interest rate to earn a bigger fee, charging something known as discretionary commission — a practice that was banned in 2021. But since the three cases went to the Supreme Court, there have been concerns that a ruling in favour of all of them would have allowed millions of drivers to claim for compensation.
Friday's verdict means that only those who have genuinely been treated unfairly will be able to make a claim.
The government has said it will work with regulators to unpack the Supreme Court's ruling and its impact on consumers, banks and the car industry.
• I want to overpay my car finance, but Santander won't let me
We have seen many commission-linked scandals over the years. Payment protection insurance (PPI) was a worthless product flogged to simply make money. Same with credit card cover.
Mis-sold annuities, pensions and with-profits funds were all driven by salespeople's desire to make vast sums by giving bad advice that was often life-destroying.
But can commission on car finance really be compared with these scandals? Hardly. This commission was linked to the sale of a car — a product used by the owner. Not once, not twice, but often every day, year in, year out.
Most of these drivers didn't get a bad deal. They bought cars they liked on deals that were good and hassle-free. Not many drivers would have £50,000 lying around to buy a new car; loans allowed them to get behind the wheel of something new, while keeping payments affordable — and you can swap cars every few years.
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Car finance has become a big business — more than nine in ten new cars are bought this way. New lending was worth £39.7 billion in the 12 months to May 2025 — up from £20 billion in 2008.
I don't believe for a second that everyone who took out car finance suffered with buyer's remorse — especially those who weren't subject to discretionary commission. Redress is to compensate for a loss but have all these drivers really suffered a loss? The court ruling means that only those who have genuinely been mis-sold will be able to make a claim.
If people have been ripped off, it's only right that they get compensation. But if you've been happy with your deal, should you really claim compensation? Surely most people know that the car salesman will get something in return for selling you a loan? 'I wouldn't have got car finance if I knew the salesman got commission' — said no one.
If the Supreme Court had ruled in favour of all three cases it would have come at a great expense. The cost of compensation would have pushed up the price of loans. Small and medium-sized car loan firms may also have disappeared, leading to less competition and higher rates. And what would have happened to the car industry, largely propped up by these loans?
If we haven't got car finance, what options do people have?
You can buy a car with cash. But not all drivers have that kind of money, and it's often not a smart way to use your money if you do — new cars lose up to 20 per cent of their value the moment they're driven off the forecourt.
You can, of course, buy a used car. But second-hand cars come with their own issues — they may not have a warranty and they could end up being expensive if they need lots of repairs.
This sorry saga has highlighted a shocking compensation culture that Britain has managed to nurture in the wake of the PPI scandal.
It's welcome news that common sense has prevailed. Ultimately, consumers will be the ones to benefit.
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