If you are wondering how much you could be owed for mis-sold car finance, the answer is not a fixed figure — it is a calculation. The FCA's Policy Statement PS26/3 (March 2026) mandates a specific formula that every lender must use, based on the type of commission arrangement in your agreement, the size of your loan, and the date it was taken out.
Our earlier guide on how much car finance compensation could you get gave you illustrative ranges. This post goes further: it explains the FCA's actual formula — the hybrid remedy and the commission repayment method — step by step, so you understand exactly how your compensation figure will be calculated. For the scheme overview, see our post on the motor finance redress scheme PS26/3.
Why the FCA Uses a Formula — Not a Fixed Amount
Car finance mis-selling happened across nearly 20 years of agreements, millions of consumers, and dozens of lenders. The financial harm in each case was different: a larger loan with a higher DCA-inflated interest rate over a longer term produced much greater consumer harm than a smaller, shorter agreement with a modest undisclosed commission.
Rather than setting a flat payment for all affected consumers, the FCA developed a formula that scales compensation to the actual harm suffered in each agreement. This means your compensation reflects your specific financial loss — not an average across the industry.
The Two Calculation Methods
PS26/3 establishes two distinct compensation methods. Which one applies to your agreement depends primarily on the type of commission arrangement and its size. The relevant commission types are explained in our post on the three types of hidden commission in car finance.
Method 1: Full Commission Repayment
This is the highest compensation tier. It applies where all three of the following conditions are met:
- The agreement involved an undisclosed Discretionary Commission Arrangement
- The commission paid was at least 50% of the total cost of credit
- The commission was at least 22.5% of the loan amount
Where these conditions are met, you receive: the full commission paid by the lender to the dealer, plus compensatory interest at Bank of England base rate plus 1% per annum (minimum 3%) accruing from the date of the agreement.
This produces the largest payouts, because the commission on DCA-based agreements was often a very significant sum. On a £15,000 agreement where the dealer earned £3,000 in commission, for example, you would receive £3,000 plus interest — which at 3% per annum over 10 years adds approximately £900 in simple interest, giving a total of approximately £3,900.
Method 2: The Hybrid Remedy
This applies to all other eligible agreements — the vast majority of cases. The hybrid remedy takes the average of two figures:
- Figure A: The estimated financial loss, calculated using the FCA's APR adjustment methodology
- Figure B: The commission paid by the lender to the dealer
Compensation = (Figure A + Figure B) ÷ 2, plus compensatory interest at Bank of England base rate plus 1% per annum (minimum 3%), accruing from the date of the agreement.
Understanding the APR Adjustment (Figure A)
The FCA's APR adjustment is the mechanism for estimating how much more you paid than you would have paid on a fair, arm's-length agreement. It works by applying a percentage reduction to the APR you were actually charged, then calculating how much less you would have paid in total interest if your APR had been that percentage lower.
The adjustment rates are:
- 17% APR adjustment for agreements from 1 April 2014 to 1 November 2024
- 21% APR adjustment for agreements from 6 April 2007 to 31 March 2014
The higher adjustment for pre-2014 agreements reflects the fact that DCA practices were more severe and less regulated before the FCA took over regulation of consumer credit. This means older agreements tend to attract higher estimated losses — even for similar loan amounts.
Illustrative Worked Examples
The following are illustrative approximations based on the FCA's published methodology. Actual compensation will be calculated precisely by the lender.
Example 1: Post-2014 Agreement, Hybrid Remedy
Agreement: £12,000 PCP, 2017, 4-year term, APR 12%, post-2014
- Total interest paid: approximately £1,550
- APR adjustment (17%): reduces APR from 12% to approximately 9.96%
- Estimated loss (Figure A): approximately £530
- Commission paid (Figure B): approximately £800 (illustrative)
- Hybrid remedy before interest: (530 + 800) ÷ 2 = £665
- Compensatory interest at 3% for 8 years: approximately £160
- Approximate total: £825
Example 2: Pre-2014 Agreement, Hybrid Remedy
Agreement: £8,000 HP, 2011, 4-year term, APR 14%, pre-2014
- Total interest paid: approximately £1,290
- APR adjustment (21%): reduces APR from 14% to approximately 11.06%
- Estimated loss (Figure A): approximately £380
- Commission paid (Figure B): approximately £700 (illustrative)
- Hybrid remedy before interest: (380 + 700) ÷ 2 = £540
- Compensatory interest at 3% for 14 years: approximately £227
- Approximate total: £767
Note: These are illustrative examples only. Your actual compensation depends on the specific details of your agreement and the commission data held by your lender.
The Role of Compensatory Interest
Compensatory interest is one of the most significant — and often underestimated — components of PCP mis-selling claims. Because the FCA's 2019 investigation confirmed the mis-selling started as far back as 2007, interest has been accruing for up to 19 years on some agreements.
At 3% per annum simple interest, £500 of base compensation from a 2010 agreement accumulates approximately £240 in interest by 2026 — adding nearly 50% to the base payout. For agreements from 2007 and 2008, the interest addition is even more substantial.
How to Get Your Actual Figure
A precise calculation requires your actual loan amount, interest rate, agreement duration, and lender-held commission data — most of which PCP Missold retrieves on your behalf. See our how it works page for the full process, confirm your eligibility with our PCP eligibility checker, and check which providers are covered on the lenders we claim against hub.
For the payment timeline — when you can expect to actually receive your compensation — see our post on the car finance claim timeline.
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