Motorists may be paid “thousands of pounds” in compensation after car finance agreements were mis-sold to consumers, according to money expert Matt Allwright.
The expert revealed that the industry was talking about “big money” being handed out with “huge numbers of people” likely affected.
It comes after the Financial Conduct Authority (FCA) announced an investigation into misconduct in the car finance trade.
Money expert Martin Lewis has also raised awareness of the issue which he claimed could become the new PPI.
It has emerged brokers may have benefitted from high-interest deals without properly informing consumers.
The Financial Ombudsman Service recently sided with two consumers in cases against providers which formed the basis behind a larger probe.
Speaking to BBC’s Morning Live, Matt said: “It is mis-selling on a massive scale. Huge numbers of people are involved.
“They are talking about an equivalent sum of around £40billion which should be handed back in compensation. We are talking about thousands of pounds per person. Big money and lots of people affected.
“This is all to do with financing cars. We know 80 – 90 percent of new cars and used cars are financed. They are bought using a package like a PCP with personal contract purchase or hire purchase.
“Built into those it turns out has been a commission system which hasn’t been entirely clear and hasn’t been entirely fair.
“We know not all of those contracts, not all of those finance deals have been mis-sold but we think about 40 percent have been.”
Martin Lewis revealed “millions” of motorists would likely be impacted once the investigation had concluded.
The Money Saving Expert has predicted the FCA will offer customers a form of refund or more likely it will see the introduction of a “fixed redress scheme”.
A quick back-of-the-envelope calculation saw Martin suggest that “billions of pounds” could be paid back to consumers.
Matt added: “We are talking about something that touches a lot of people in the car finance industry where the brokers, the dealers the people selling the cars, have been profiting from higher interest rates.
“They have skin in the game when they are selling the car to you to have a higher interest rate than perhaps you could have got from them in the first place.”
