What is Motor Finance Commission?

In early April 2025 the Supreme Court heard one of the most important consumer financial arguments in decades, but what is motor finance commission?

Put simply, motor finance commission is an undisclosed payment made by the finance provider to the dealership so as to incentivise the dealership into offering one finance agreement to a consumer, over another finance agreement.

The motor finance industry has made every attempt to cover up the practice, and still argues that these payments are fair, transparent and reasonable.

However, as Mr Keir KC so eloquently explained during the Supreme Court hearing, these payments can only be considered as bribes.

The Types of Motor Finance Commission

In essence there are two types of motor finance commission, Discretionary Commission Arrangements and Fixed Commissions.

• Discretionary Commission Arrangements, or DCAs for short, allow the dealership to increase the interest rate charged to a consumer so as to receive a larger commission from the lender. DCAs were correctly banned by the Financial Conduct Authority in 2021 as they cause significant consumer harm.
• Fixed Commissions do not allow for the dealership to increase the interest rate offered by the lenders. Fixed Commissions have not been banned but it is clear that they are equally harmful to consumers and we’ll explain why.

Fixed Commission – Scenario One

Mr Smith is looking for a new car and visits his local dealership

Mr Smith explains to the dealership that he requires finance to fund the purchase of a new car.

The salesperson asks Mr Smith if he has a budget in mind – IMPORTANT – this seems like a helpful question but it will be used against Mr Smith – Mr Smith responds and says his maximum monthly budget is £400.00

Mr Smith settles upon the car he wants and sits down with the salesperson, who takes some details from Mr Smith so that a credit application can be submitted.

The salesperson then takes Mr Smith’s details away to the office, telling Mr Smith that they will find him the best deal – IMPORTANT – Mr Smith rightly assumes this will be the best deal for him – Mr Smith is left to have a look around his potential new car.

The salesperson puts Mr Smith’s details into the dealership computer system, and is provided with the following offers:

• Lender A offers a monthly payment of £320.00 with no commission (bribe) payment to the dealership.
• Lender B offers a monthly payment of £350.00 with a commission (bribe) payment to the dealership of £500.00.
• Lender C offers a monthly payment of £380.00 with a commission (bribe) payment to the dealership of £1,000.00.
• Lender D offers a monthly payment of £410.00 with a commission (bribe) payment to the dealership of £1,500.00.

The salesperson goes back out of the office and returns to Mr Smith… “Good news Mr Smith, I’ve got you the deal and it is within your budget”.

The salesperson puts the offer from Lender C – £380.00 per month to Mr Smith, who then signs the finance agreement.

Why did Mr Smith happily sign the finance agreement?

• It is within his budget of £400.00 – he got the deal for £380.00.
• The dealership told him that it would get the best deal.
• Mr Smith was not made aware of the better deals available to him.

Mr Smith ultimately paid more interest than he could have paid, and even paid for the commission (bribe) via the increased monthly payments on his finance agreement.

Discretionary Commission Arrangement – Scenario Two

Let’s pick things up from the moment the salesperson takes Mr Smith’s details and takes them to the office, leaving Mr Smith with the car and the knowledge that the salesperson will find the best deal.

The salesperson puts Mr Smith’s details into the dealership computer system, and is provided with the following offers:

• Lender A offers a monthly payment of £320.00 with no commission (bribe) to the dealership.
• Lender B offers a monthly payment of £350.00 with a commission (bribe) to the dealership of £500.00.
• Lender C offers a monthly payment of £380.00 with a commission (bribe) to the dealership of £1,000.00.
• Lender D offers a monthly payment of £320.00 with a commission (bribe) to the dealership of £300.00 – However, the lender allows the dealership to increase the monthly payments if it wants to earn a bigger commission – For every £10.00 increase in monthly payment the dealership earns an extra £100.00 commission.

The salesperson goes back out of the office and returns to Mr Smith… “Good news Mr Smith, I’ve got you the deal and it is bang on your budget”.

The salesperson puts the offer from Lender D – £400.00 per month to Mr Smith, who then signs the finance agreement.

The dealership increased the monthly payments from £320.00 to £400.00, thus earning an increased commission (bribe) of £1,100.00.

Why did Mr Smith happily sign the finance agreement?

• It meets his budget of £400.00.
• The dealership told him that it would get the best deal.
• Mr Smith was not made aware of the better deals available to him, nor the fact the dealership increased his interest rate.

Regulator & Government Intervention and Cover-Up

The primary role of the Financial Conduct Authority (FCA) is to protect consumers from financial harm.

However, it took the side and supported lenders and the motor finance industry at the Supreme Court hearing.

The government also has a clear duty and obligation to protect its citizens.

However, it attempted to intervene at the Supreme Court hearing by suggesting a win for consumers could cause serious financial harm for the motor finance industry.

The conduct and positioning of both the regulator and the government must call into question their integrity as both seek to protect business over consumer rights.

Martin Lewis’ lack of knowledge and potential harm

Martin Lewis, the self proclaimed consumer champion, has suggested that a victory for consumers against fixed commission goes too far.

This shows a lack of understanding and the harm caused by ALL types of undisclosed commission.

The quick and simple fix

For decades consumers have been ripped off by lenders taking advantage of poor regulation.

Now is the time for the Supreme Court to set the standard and expectation by banning undisclosed commissions (bribes).

Lenders and dealerships must be transparent with consumers, clearly providing ALL options available and clearly displaying any and all commission payments to be made.

Failing that, there will inevitably be yet another financial scandal in the not too distant future.

YOUR MONEY CLAIM