The vast majority of new cars, and many second-hand ones, are bought with finance agreements.
About two million are sold this way each year, with customers paying an initial deposit, then a monthly fee with interest for the vehicle.
In 2021, the FCA banned deals in which the dealer received a commission from the lender, based on the interest rate charged to the customer. These were known as discretionary commission arrangements (DCAs) and meant drivers were at risk of overpaying for the loan.
Other car buyers had an unfair contract because the commission paid to the dealer was so high, and some were not given accurate information about getting the best finance deal.
The regulator has now proposed a scheme to compensate drivers who were subject to these arrangements.
