Ever puzzled over how so many people are cruising around in ultra-luxurious vehicles? In the majority of instances, they don't actually own these cars outright. They've utilised car finance to "purchase" them.

However, a significant number of these vehicles may have been mis-sold, implying that if you bought a car between 2007 and 2024, you could be eligible for an average compensation of £700.

This could potentially set the industry back by £8.2 billion - a staggering amount, albeit less than initially anticipated. But how did we arrive at this point and who's eligible?, reports the Mirror.

The Financial Conduct Authority (FCA), the regulator of the financial services industry, has proposed a compensation scheme for millions of drivers who may have been mis-sold their car finance agreements. Read the biggest stories in Wales first by signing up to our daily newsletter here.

The mis-selling itself is rather intricate and what's the issue with car and vehicle finance?

If you've purchased a car or vehicle in the past decade, it's likely you've taken out a Personal Contract Plan (PCP). In 2023 alone, £52 billion was lent to individuals to fund purchases of both used and new vehicles.

It's estimated that around two million people enter into these deals each year. Car and vehicle finance is a substantial industry.

However, these finance agreements are incredibly complex - and there are various ways you could have been mis-sold your finance deal (or add-on contracts like insurance too).

In 2021, the FCA banned a type of "discretionary commission" on motor vehicle agreements. Discretionary commission allowed the dealer to increase the amount of interest you paid on your loan to enhance their commission.

The FCA estimated that around 924,000 customers were paying £500 million in additional interest annually.

Because the FCA had already determined this was unfair, it is proposing to introduce a compensation scheme for those affected. This had to be delayed because the highest court in the UK was considering a legal case about this very subject.

You don't need to understand all of this to claim, but if you're interested, here are the term to look out for:.

Firstly, you don't need to know or understand the ins and outs of any of this to make a claim!

All that matters is if you were sold a motor finance agreement taken out between April 6 2007 and November 1 2024. Alex Neill from Rip Off Britain has tips on complaining about car finance.

Alex says that other things to bear in mind are:.

If you've not yet been contacted, it's time to start rummaging through your old paperwork to find any previous agreements. If you're having trouble locating them, your credit reference report may list old deals and bank statements could assist in identifying the lenders.

Should you have already received compensation, or if your claim was rejected by the Financial Ombudsman or lender, you will be contacted if you are due further compensation.

Free websites such as Consumer Voice and MoneySavingExpert provide information, updates, and template letters for download.

Claims management companies, or CMCs, are businesses that lodge complaints or claims on your behalf for a fee. Remember the PPI mis-selling scandal?

CMCs made billions by charging exorbitant fees of up to 40% of winnings for doing nothing more than assisting you in filling out a form that you would have had to complete anyway if you lodged the complaint yourself.

The FCA is so concerned about hundreds of these firms aggressively targeting individuals to make motor finance claims on their behalf that it has issued a series of warnings and is taking action against the industry and many firms individually. Do. Not. Sign Up.

If you feel you've been misled, don't hesitate to lodge a complaint. You could also enquire about an exit fee to terminate the contract, which might be more cost-effective.

If you're dissatisfied, the free Claims Management Ombudsman is available for contact.

BBC Radio Scotland, presenter Connie McLaughlin shared that she'd received an incredibly convincing email from a company that appeared identical to the lender she had lodged a complaint with, requesting her bank details. It was a sham.

Be vigilant for fraudulent emails, texts and even phone calls. Only lodge complaints directly with your lender and avoid clicking on links from them, the FCA, ombudsman or anyone else.

Always use official websites or phone lines to pursue a claim.

Car finance compensation explained as millions of Brits could be owed money | Wales Online