How can commission be hidden?

Although your finance agreement might look straightforward enough, you may be surprised to learn that the commission you have been charged can be disguised in a number of ways. Car finance agreements often include a clause such as ‘We may receive a commission from the lender if you enter this agreement’. Most often this is in the small print in the finance documents, and unless you requested further details of this before entering the agreement, it is likely that your finance agreement contains a hidden or half-hidden commission payment. Sometimes, finance agreements make no reference whatsoever to whether a commission may be payable by the lender to the dealership. It is important to bear in mind that even if you were informed about the commission and the amount, without proper explanation about commission structures and details of other options (with less or no commission), you are not in a position to judge if or how the dealership’s ability to act in your best interests has been affected.

A common way of hiding charges for commission is to include the commission amount in the total charges for finance, which are based on the APR within your agreement. Customers are not usually aware that the lender and the dealership often have another agreement where the lender sets a minimum APR and the dealership has a discretion (within agreed parameters) to set the customer’s APR in the finance agreement.

Of course many customers are willing to pay a bit extra in commission payments for the convenience of being able to obtain finance for their vehicle at the dealership. But clearly, customers can only make an informed decision about whether an agreement is right for them if they know what the dealership is being paid to get them to sign up to a particular finance agreement.

Ideally, a customer should be offered a range of finance options before being offered a PCP finance agreement. Did that happen in your case? Were you informed about the pros and cons of alternatives such as Hire Purchase, Conditional Sale or Personal Loans? If not, it is more likely that the dealership wanted you to choose the option you did because it will have been linked to a higher commission payment.