How Is PCP Compensation Actually Calculated?
Understanding the calculation helps you estimate what you might be owed. The compensation is based on one core principle: you were charged a higher interest rate than you would have been charged if the dealer had no financial incentive to inflate it.
The calculation works like this:
- Identify your actual interest rate — the APR shown on your finance agreement
- Identify the minimum available rate — the lowest rate the lender was offering at the time (the "floor" rate that required no dealer commission inflation)
- Calculate the interest difference — the extra interest you paid because your rate was set higher than it should have been
- Add 8% statutory interest — applied annually to the overcharge amount
- Total = your compensation
Estimate Your Compensation — Free Calculator
Worked Examples: Real-World Compensation Scenarios
The following worked examples show how compensation varies depending on your agreement size, term, and interest rate differential. The "rate differential" represents the gap between what you were charged and the minimum rate available.
2019 PCP | 24 months
Rate charged: 8.9% APR
Minimum rate: 5.9% APR
Rate differential: 3.0%
2018 PCP | 36 months
Rate charged: 9.9% APR
Minimum rate: 5.4% APR
Rate differential: 4.5%
2017 PCP | 48 months
Rate charged: 10.9% APR
Minimum rate: 5.9% APR
Rate differential: 5.0%
2015 PCP | 48 months
Rate charged: 11.9% APR
Minimum rate: 5.4% APR
Rate differential: 6.5%
These are illustrative examples only. Actual compensation is calculated from official lender records. Amounts shown are estimates and do not constitute guarantees of outcome.
What Factors Affect How Much You Get?
| Factor | Effect on Compensation | Impact |
|---|---|---|
| Finance amount | Higher finance = more interest charged = larger overcharge | High |
| Agreement length | Longer term = more months of overcharged interest | High |
| Interest rate differential | Larger gap between charged and minimum rate = larger overcharge | High |
| Agreement year | Older agreements have more 8% statutory interest accumulated | Medium |
| Lender | Different lenders had different commission rate ranges and structures | Medium |
| Commission amount | Post-Johnson v FirstRand: actual commission amount may form part of claim | Medium |
| Number of agreements | Each qualifying agreement is a separate claim — amounts are additive | Multiplier |
Multiple Agreements: The Compound Effect
One of the most underappreciated aspects of the PCP mis-selling scandal is that many UK drivers had several qualifying agreements. The average car owner changes their vehicle every 3–4 years. If you have been financing cars since 2009, you could have had:
- 2009–2012: Agreement 1 — e.g. £10,000 over 36 months → est. £600–£900
- 2012–2015: Agreement 2 — e.g. £13,500 over 36 months → est. £800–£1,200
- 2015–2019: Agreement 3 — e.g. £17,000 over 48 months → est. £1,400–£2,000
- 2019–2021: Agreement 4 — e.g. £20,000 over 48 months → est. £1,200–£1,800
Total potential compensation: £4,000–£5,900 across four agreements — which would represent a very typical UK driver's car finance history over 12 years.
When Will I Actually Receive My Money?
The timeline for PCP compensation payments is:
- Now — July 2026: Registration period. Submit your claim before the 29 July 2026 deadline.
- Mid-2026: FCA formally launches the redress scheme. Lenders begin assessing claims.
- Late 2026: First compensation payments expected. Lenders with higher claim volumes (Black Horse, Close Brothers) may take longer to process.
- 2027: Bulk of payments processed as scheme reaches full speed.
What Lenders Have Provisioned for Payments
The scale of individual lender provisions confirms both the scale of the issue and the reality of forthcoming payments:
- Black Horse Finance (Lloyds): £1.95 billion provisioned
- Close Brothers: £400 million provisioned
- Santander UK: £295 million provisioned
- Barclays: £120 million provisioned
- Multiple other lenders: additional billions across the industry
These are real money set aside specifically to pay consumers. Lenders are required by the FCA to use these provisions to pay eligible claimants — including you, if you register before the deadline.