How Car Dealers and Brokers Earn Commission and Why It Matters to Your Complaint
When you take out car finance, it can feel like you’re buying a car and paying interest. Simple.
But there’s a layer underneath the deal that most people don’t see at the point of sale: commission. It’s the money paid to a dealer or broker for arranging the finance — and depending on how that commission was set up, it may have affected the rate you paid, the options you were shown, and how the agreement was explained to you.
That’s exactly why commission matters in car finance complaints. It’s not about being “anti-dealer”. It’s about whether you were treated fairly, and whether key information was withheld when you were making a decision.
If you’re already looking into a complaint, you’ll probably want to start here: Mis-Sold Finance Claims.
Why commission exists in the first place
Dealers and brokers don’t just sell cars — they also “introduce” you to a lender and arrange the finance paperwork. Lenders pay for that distribution. In other words, the commission is often the lender’s way of paying the retailer/broker for bringing them business.
On its own, commission isn’t automatically wrong. The problem is how it’s structured and whether it was properly disclosed, especially if it created an incentive to put you into a more expensive deal than you needed.
This matters because motor finance is massive in the UK. The FCA’s own market analysis says motor finance arranged at the point of sale accounts for over 80% of private new car sales and 19% of used car sales in 2024, with £39.0bn borrowed through regulated motor finance that year.
When a market is that big, even a “small” incentive problem affects a lot of people — and a lot of money.
The main ways dealers and brokers earn commission
1) Flat fee commission (fixed amount)
This is the simplest model. The lender pays the dealer/broker a set amount for arranging the finance — for example, a fixed fee for each agreement.
Why it matters: fixed fees still create an incentive to sell finance (rather than you paying cash), but they don’t automatically push the interest rate higher.
2) Percentage-based commission (linked to the amount borrowed)
Here the commission is linked to the size of the finance agreement. The bigger the amount you borrow, the bigger the commission can be.
Why it matters: it can nudge the conversation towards:
lower deposit
adding fees/add-ons into finance
stretching term length
…because that can increase the amount financed (and potentially the commission).
If you’ve ever thought, “They really wanted me to keep my deposit low,” this can be one reason.
3) Interest rate-linked commission (the big red flag)
This is where the incentive gets messy.
Historically, some lenders allowed dealers/brokers to set the customer’s interest rate within a range — and the broker earned more commission if the rate was higher. This is commonly referred to as discretionary commission arrangements (DCAs).
The FCA banned this type of model, because it created an incentive to charge customers more. The FCA’s ban came into force on 28 January 2021.
Why it matters to your complaint: if your agreement was sold under an arrangement where the broker could increase your rate to increase their commission, that can go directly to fairness and disclosure — particularly if you weren’t told what was happening, or you were led to believe the rate was “the rate”.
4) Volume bonuses and “target” payments
Some retailers get extra payments for hitting volume targets (for example, a bonus for writing a certain number of agreements in a quarter) or for steering business towards a particular lender.
Why it matters: it can affect what you’re shown. You may think you’re being offered “the best deal available”, but what you’re actually being offered is “the best deal for the retailer’s targets”.
5) Commission on add-ons (GAP, warranties, service plans)
Even if the finance commission is fixed, dealers and brokers can earn additional income from add-on products bundled into the agreement.
If you’re also questioning how extras were sold to you, it’s worth reading Our Services to see the wider types of consumer claims Claim First handles.
What the FCA has said (and why commission complaints exploded)
The FCA has been actively reviewing motor finance commission issues. In January 2024, the FCA confirmed it would undertake work in the motor finance market following high numbers of complaints about commission arrangements (including pre-ban DCAs).
Since then, the FCA has moved towards an industry-wide approach. It began consulting on a proposed motor finance consumer redress scheme in October 2025, describing it as a more efficient way to handle liabilities for customers treated unfairly between 2007 and 2024.
A Reuters report on the consultation highlighted the scale: the FCA estimated redress costs could reach £11bn, with around 14.2m agreements in scope for consideration under its analysis.
The pause on complaint handling and what’s happening now
If you’ve heard people say “complaints are paused”, that’s not a rumour — it’s part of the FCA process while it finalises the approach.
In December 2025, the FCA published policy changes to complaint handling timelines and confirmed it is lifting the pause on handling certain motor finance complaints on 31 May 2026.
It also clarified an important detail: leasing complaints are excluded from any potential consumer redress scheme, and firms had to start sending final responses on leasing complaints from 5 December 2025.
If you’re unsure where your agreement fits, start with the practical basics on FAQ'S and then take it from there.
Why commission matters to your complaint (in plain English)
Commission becomes complaint-relevant when it links to fairness, disclosure, and conflicts of interest.
Here’s what that looks like in real life.
1) You may have paid a higher APR than you needed to
If the dealer could adjust your interest rate and earn more by putting you on a higher rate, you’ll want to know:
Was the rate negotiable?
Were you told the broker was incentivised to increase it?
Were you offered comparable alternatives?
The FCA banned DCAs precisely because brokers were rewarded for charging higher rates.
2) You may not have been told about commission properly (or at all)
There’s a big difference between:
“We may receive commission” (vague)
and“We receive commission and it can vary depending on the finance terms” (clear)
If you weren’t told anything meaningful about commission, or you were told it was irrelevant, that can matter.
The Financial Ombudsman has a dedicated section explaining how it looks at commission complaints, what evidence helps, and what “fair” outcomes can look like.
3) The advice you received might not have been in your best interest
If the person selling the finance was rewarded more for one lender/product/rate than another, it can influence:
which lender you were placed with
whether you were encouraged to increase the term
whether you were steered toward PCP/HP without a balanced explanation
4) You may have been pressured or rushed
Commission-driven selling often shows up as:
“This rate is only available today”
“That’s the lender’s best offer” (when it may not be)
a focus on monthly payment only, not total cost
limited discussion of other options
If this sounds familiar, it may be useful to look at what people say about the process on Testimonials.
What documents and details help your complaint
If you’re gathering info now, don’t overthink it. Start with what you have.
Useful items include:
finance agreement (PCP/HP/loan documents)
pre-contract information and quotations
any “finance illustration” showing APR and total amount payable
order form showing deposits, fees, and add-ons
emails/texts with the dealer/broker
evidence of what you asked for (e.g., “best rate”, “lowest total cost”)
notes of what you were told about commission (even your own written recollection can help)
If you want to speak to someone about your specific situation, the simplest route is Contact Us.
Where Claim First fits in (and what you can expect)
If you’re looking at a complaint, the key is clarity: what happened, what you were told, what you were shown, and what you ended up paying.
Claim First sets out how it supports people across different claim types on About Us. And if you want the formal bits before you start anything, you can review the Complaints Procedure, Terms and Conditions, and Privacy Policy.
FAQs
What is a discretionary commission arrangement (DCA)?
A DCA is a commission model where a dealer or broker could earn more by charging you a higher interest rate. The FCA banned these models, with the ban coming into force on 28 January 2021.
If commission existed, does that automatically mean my finance was mis-sold?
Not automatically. The commission exists in lots of markets. It becomes a problem when it creates an unfair incentive (like rate-setting), wasn’t properly disclosed, or affected the fairness of what you were offered and how it was explained.
I used a broker, not a dealership — does this still apply?
Yes. Brokers can earn commission too, and the same conflict-of-interest issues can apply if commission influenced the terms you were given or the information you received.
My agreement is from before 2021. Does that matter?
Potentially, yes. The FCA’s work has focused heavily on pre-ban practices and complaints about commission arrangements before the 2021 changes.
Why are some motor finance complaints “paused” until 2026?
The FCA extended complaint-handling timelines while it develops an industry-wide approach and has said it will lift the pause on handling certain motor finance complaints on 31 May 2026.
What if I’m not sure whether commission was involved in my deal?
That’s common. Many people only discover commission later. Start by pulling your agreement and any pre-contract paperwork, then take advice based on the facts of your sale and the way it was explained.
Next steps
If you feel like your car finance deal wasn’t set up in your best interests — especially if you were put on a higher rate without a clear explanation, or you were never properly told how commission worked — it’s worth checking your options.
Start with Mis-Sold Finance Claims, and if you want to talk it through, reach out via Contact Us.
