Negative equity occurs when the remaining balance on your car finance is higher than the vehicle’s current market value. This is a common issue in Personal Contract Purchase (PCP) agreements, where balloon payments can leave borrowers in a financial trap. Many drivers are now discovering that hidden commissions in their finance deals may have contributed to this situation.
Can You Claim for Negative Equity in PCP?
If you financed a car before 2021, you might have been overcharged due to undisclosed commissions. Between 2007 and 2021, many lenders and brokers earned hidden commissions from finance providers, increasing costs for consumers. If you took out a PCP finance agreement during this period, you could be eligible for a claim.
The Impact of Hidden Commissions on Negative Equity
The Financial Conduct Authority (FCA) found that discretionary commission arrangements allowed dealers to increase interest rates for extra commission. This led to higher borrowing costs and, in many cases, greater negative equity. If you were affected, you may be entitled to compensation for unfair financial losses.
How to Check If You Are in Negative Equity
- Compare your outstanding finance balance with your car’s current market value.
- Check your contract for any discretionary commission arrangements.
- Use the Mis-sold Car Finance Payout Calculator to estimate what you could claim back.
The Latest FCA Update on PCP Claims
The FCA has extended the pause on motor finance firms responding to discretionary commission complaints until 4 December 2025. This means lenders have more time to process claims, but it also gives affected consumers more time to gather evidence and submit their complaints.
What Compensation Can You Expect?
If your claim is successful, you could recover the extra interest you paid due to hidden commissions. Some claimants have received thousands of pounds in refunds. Compensation varies based on how much extra interest you were charged and the lender’s response to your claim.
Steps to Make a PCP Claim for Negative Equity
- Check Your Agreement – Look for details on interest rates and commission arrangements.
- Gather Your Evidence – Obtain copies of your finance contract, payment history, and communication with the lender.
- Submit a Complaint – Contact your lender or finance provider with a formal complaint.
- Wait for the Response – Due to the FCA pause, expect delays, but persistence is key.
- Seek Legal Help If Needed – If your lender refuses to compensate, consider escalating to the Financial Ombudsman Service.
Can You Still Voluntarily Terminate Your PCP Agreement?
If you are struggling with negative equity, voluntary termination under Section 99 of the Consumer Credit Act 1974 may be an option. This allows you to return the car and walk away after paying 50% of the total finance amount. However, this does not recover any overpayments caused by hidden commissions.
Why PCP Claims Are Increasing
More drivers are becoming aware that they were mis-sold finance deals with undisclosed commissions. As legal firms and financial experts investigate these cases, thousands of consumers are reclaiming money they unknowingly overpaid. If you took out a PCP finance agreement before 2021, it is crucial to check if you were affected.
Final Thoughts
If you suspect hidden commissions inflated your finance costs, you have nothing to lose by checking your eligibility. Use the PCP Claims service to assess your case. With the FCA extending the deadline, now is the right time to start your claim and recover what you are owed.
