Consumers are paying more as motor finance commissions redress approaches

With the FCA's motor finance redress scheme announcement due shortly, here's a newly updated chart based on my analysis of lending rates in the market that might help to put things in perspective.

For used car secured finance excluding captives - the expected focus of the redress - it shows the share of total lending book values split between the lowest cost lenders with APR below 10% in 2026, medium cost lenders with current APR from 10% to 30%, and higher cost lenders with current rates above 30%. It includes the largest 28 lenders over the last ten years, including those that have left the market. Data is based on audited financial accounts, with various estimates and assumptions needed for some firms.

My approach strips out the effects of changing base rates and inflation to focus on relative prices across the market. The low cost lenders segment has lost market share as firms have limited or stopped lending. Consumers who previously would have obtained low cost loans are now having to pay more with alternative lenders, often firms owend or funded from outside of the UK without a legacy commissions redress exposure.

For other parts of the UK consumer credit market, the long-term trend is quite the reverse, away from higher cost lenders towards better value options. That is, in no small way, the result of other types of FCA interventions.

The only winners from motor finance commissions redress will be higher cost lenders. Only a wider review of the motor finance market, not redress, will genuinely help consumers and the wider economy.

SHARE OF UK USED CAR SECURED FINANCE MARKET LENDING NET BOOK VALUES BY TYPE OF LENDER 2014/15 to 2024/25 (EXCLUDING CAPTIVES)