Martin Lewis has told drivers who purchased cars before 2021 exactly how much they are likely to receive in compensation payouts.
Motorists who purchased a vehicle on car finance deals could be eligible for money back due to an FCA investigation.
The finance experts are looking into “widespread misconduct” among motor finance firms with thousands of pounds expecting to be repaid.
It comes after it emerged many firms had misled customers over discretionary commission arrangements on their contracts.
The probe was launched after the Financial Ombudsman Service sided with two customers who had made complaints to their lenders.
Crunching the numbers, Martin has estimated motorists affected by the probe could be in line for four-figure payouts if they process a claim as soon as possible.
Speaking on the Martin Lewis Money Show, he said: “How much is likely to be repaid? Now we’ve got two Ombudsman cases prior to this and they did it roughly the same way.
“I say roughly, I have oversimplified this but it’s giving you the scales of magnitude that we are talking about.
“In one case a borrower bought a car that cost £7,619. But, they were charged a flat 5.5 percent rate of interest.
“Now I must say car dealers used to do this without quoting the APR which is outrageous.
“A flat interest rate is not the same as an APR. It effectively is a non-compounding interest rate that works over the years. That is the equivalent to over a 10 percent APR. It’s how they made you think you were getting it for a lot cheaper than you were.
“This was the rate on this particular deal. It was a flat interest rate. The interest paid was just under £2,100 over the five years.
“But, the cheapest rate that firm had was a flat 2.49 perfect which would have cost £949 over the five years. So how much did the Ombudsman say they should be paid, take away the £949 from the £2,096, £1,147.”
Martin has stressed those with larger and more expensive cars could be owed a lot more.
However, the money guru suggested the average payout for motorists will likely be around the £1,100 mark.
He added: “Now that’s on a £7,500 car. If it was a bigger car and a higher interest rate you could be paid more. Some people will be owed thousands back. A typical buyer paid an average of £1,100 over the odds.”
