How YOUR new car on finance is at the heart of hidden multi-billion pound industry where dealers profit off commission payments

When Marcus Johnson spotted an ad about car finance mis-selling on Facebook, he had no idea that clicking on it would one day plunge Britains motoring finance giants into crisis and expose a hidden multi-billion pound industry ripping off drivers.

Marcus, 34, a factory supervisor from Cwmbran in south Wales, bought his £6,500 Suzuki Swift from a dealership in Cardiff in 2017 shortly after passing his driving test. 

Aged just 27 at the time and earning around £13,000 a year, he couldnt afford to buy his new run-around outright, so he took out a finance deal through MotoNovo that cost £154 a month over five years, plus a £100 deposit. 

However, what he didnt realise was his car dealer received a secret commission payment of £1,651 - roughly a quarter of the amount he borrowed. 

Mr Johnson was not told the dealership had an agreement with MotoNovo - which is owned by the South African bank FirstRand - that guaranteed it first refusal on finance. He also had no idea about the commission deal. He only learned of this after speaking to his lawyers, who he met through the social media ad.

The factory worker is now one of the unlikely architects of a court case that sent Britains car finance firms into a spiral after exposing the FirstRand Bank lending agreements which included secret commission payments to the dealerships selling the motors.

He took his lender to county court, hoping to have the commission returned - but his case was merged with two others and elevated to Britains top appeal court, with seismic consequences on a scale not seen since the PPI scandal of the 2000s, that could cost the car finance industry a staggering £13billion.

I had always thought that car dealerships made their money by making a profit on the cars that they sell rather than by arranging finance, Marcus said in his witness statement, the BBC reported.

Marcus Johnson, 34, a factory supervisor from Cwmbran in south Wales, bought his £6,500 Suzuki Swift from a dealership in Cardiff in 2017 shortly after passing his driving test

Pictured is Marcuss metallic blue Suzuki Swift which he bought on finance when he was 27

I had no idea before then. Commission as part of the industry is not necessarily a bad thing, he said. But it was kept out of sight. If they are deceiving customers then, to me, thats disgusting.

He lost his initial court case. However, at the higher Court of Appeal, the case was combined with two others, with three judges unanimously ruling in their favour. 

The other two car owners involved in legal battle were Andrew Wrench, described as a postman with a penchant for fast cars, and Amy Hopcraft, a student nurse. 

The judges landmark ruling was a win for the trio, but - more significantly - opened the door for claims from many, many more motorists ripped off in the car finance scandal. 

At the Court of Appeal, Lady Justice Andrews and Lords Justices Birss and Edis ruled Mr Johnson and his fellow car buyers had not made a truly informed decision on finance because they did not know their dealership was being paid for the deal.

Just like that, the borrowing market imploded: Shares in FirstRand and Close Brothers, the other lender implicated in the judgement, tumbled.

Elsewhere, Lloyds set aside millions for compensation; BMW and Honda halted new car deliveries; other dealerships froze purchases as they hurriedly rewrote credit agreements to mention commission.

The consequences could be huge for the lending market - with between 80 and 90 per cent of new UK car purchases made on credit. The Finance and Leasing Association says its members issued £52billion of car loans last year. 

Postman Andrew Wrench, 60, is one of the unlikely architects of a legal case that has turned the UKs borrowing industry upside down

Former retail manager Mr Wrench snapped up this special edition Audi TT for his wife in 2015 on finance - unwittingly getting the dealership a commission

Two years later, Mr Wrench snapped up this sleek BMW 3 Series convertible - again netting a dealership a payout because it referred him for finance

But experts say the judgment could have even wider consequences for the borrowing market as a whole if loans, credit cards and even mortgages are sold by brokers who receive commission payments in return. 

And the Financial Conduct Authority is widely expected to expand its investigation into commission to include all secret payments after it began probing agreements that saw dealers paid a bonus directly linked to the interest rates they set on loans.

Analysts at RBC say that if a compensation scheme is launched, it could cost lenders £23bn - comparable to the £38bn paid out for PPI. Redress could range from £400 to £1,100 depending on the type of commission paid, the Financial Times reports. 

Quite by accident, Mr Johnson has become a unofficial consumer champion - one who helped bring about a colossal moment of judgement for Britains lenders.

But the factory supervisor just wanted to make sure he was getting a fair deal. He never expected his case to go to court - let alone create the financial tsunami that has thrown Britains motoring finance industry into meltdown. 

For Marcus, though, he couldnt bear the thought of people losing out. And lots of people who did not have the money to buy a car were ripped off, he added. 

Andrew Wrench, who was also part of the landmark court case feels the same. 

The Stoke-on-Trent father of one - who has claims to have owned 30 cars over four decades - snapped up a sporty Audi TT and a BMW convertible on finance a few years ago. Little did he know the move would lead to an almighty reckoning for the UKs lending industry. 

Mr Wrench, 60, says he only because aware of the commission handed to each dealership after he studied the paperwork years later

I never buy cars on finance, the 60-year-old told MailOnline. Ive had Porsches, Mercedes, a Triumph Stag with the V8 three-litre - and Ive always paid cash.

The former retail manager, who now delivers parcels for Royal Mail, said he was blown-up by the outcome of the landmark legal ruling.

I didnt expect this impact, he said. Its been a bit of a whirlwind.

Did I do it for the money? No. I did it for the principle of it.

My wifes colleagues have gottoned on and see my name, and asked, "Is this your Andy? Do you realise what hes done to the market?"

Its not me, personally. I havent done anything as a vendetta or anything to the market.

But the cats out the bag and the truth has been found out.

Mr Wrench is described as a postman with a penchant for fast cars in the judgment. On May 23 2015 he snapped up a used Audi TT Quattro Sport - a special edition of the coupe in two-tone red and black paint that can hit 60mph in less than six seconds - for which he put down a £3,000 deposit against the £8,995 price.

He bought the Audi from Fast Lane Motors in Stoke-on-Trent, putting down a £3,000 deposit and paying the rest on finance

The BMW was sourced from TT Sports and Prestige in Derby - who picked him up from the local train station in the car itself before he drove it away the same day

The dealership, Fast Lane Motors in Stoke, offered him a deal at £175 per month over four years for the remaining £5,000 to pay on the car, which he purchased for his partner Louise shortly after her mother passed away.

I just happened to be walking past at the time, saw it, took a picture, went in and paid a small deposit to hold it of £50. I came home, showed her it and her eyes just sort of lit up, he recalls.

The sale was quick, he remembers: The salesman came back with the paperwork and it was quite swift: bang, bang, bang, four signatures required and away you go.

Less than two years later, he came across a lustrous blue BMW 3 Series hard-top convertible coupe with a throaty 2.5litre engine. This one would be for him.

He contacted the dealership, TT Sports and Prestige, and hopped on the train to Derby on March 13 2017. 

The salesman met him at the train station in the car itself - a clever sales pitch, Mr Wrench notes - and he bought the car that day, putting down £1,000 against the £9,750 price and funding the rest of the purchase with another credit agreement.

He remembers: We went back to the place, sat down, chewed over the cod as you do, and then the bottom line, sign here, £220 a month and you can drive it away today. Wow!

Mr Wrench borrowed the money for the Audi at an APR of 19.3 per cent and the BMW at a APR of 10.2 per cent. Both were four year agreements. 

In each cases, the court said Mr Wrench had been told by the dealerships they would get him the best rate from their panel of lenders.

But in reality, Mr Wrench had unknowingly helped the dealers to make an extra win on his car sale when he agreed to finance the purchases through MotoNovo - which lent £3.9billion to Brits in the year to June 2024.

Fast Lane was paid £179.85 for the Audi loan, while TT Sports and Prestige was paid a total of £408.98 for the BMW. Of that, £299.60 was difference in charge commission - a now outlawed bonus that was directly linked to the interest rate.

The postman was completely unaware he was doing the dealerships an extra favour. He admits that he did not read the lengthy terms of the finance agreements from beginning to end - because, frankly, who does?

MotoNovo Finance paid Fast Lane nearly £180 in extra commission for the Audis sale

TT Sports and Prestige, meanwhile, was paid over £400 - of which nearly £300 was directly linked to the interest rate on Mr Wrenchs finance agreement

The scandal has been compared to the mis-selling of payment protection insurance (PPI), which cost banks billions. Experts say this could do the same to lenders (stock image)

If anybody says different, theyd be lying, he says. There are tens of thousands of people who do this every year.

He says he has read comments on news articles about the ruling that call him an idiot and a clown for not reading the agreement from cover to cover.

But the Court of Appeal actually sides with him on this - noting that lenders are almost certainly aware there is a negligible chance of consumers reading the terms from top to bottom. 

In fact, the judges said, FirstRand actively counted on it, hiding the reference to a commission in a carefully concealed sub-clause of the finance agreement under a heading called General - a ruse they called an attempt to divert attention from it. 

It was only when, last year, he read over the contract for a Range Rover he bought on finance in 2019 that he spotted a reference to commission payments. He then pulled out the agreements for the BMW and the Audi - and realised he had been had.

With a legal team including Jamal Ahmed, of Bradfords Cooper Hall Solicitors, barrister Greg Lawton, and Consumer Rights Solicitors, he set his legal action in motion.

Ive always thought, having owned 30-odd cars over 40-odd years, is that when you buy a car, whether its a dealership or a private independent dealer, those cars are on the forecourt for a markup, Mr Wrench said.

It was about trust. Im a very trusting person. But dealerships push the finance because its better for them than money in the bank.

I had always thought up to this point the interest MotoNovo makes was sufficient for them and the markup for the dealership goes in their bank.

But knowing this now leaves a bitter taste in my mouth.

The Royal Courts of Justice, in London, where the Court of Appeal sits. It has moved to block any further appeals against its decision by FirstRand and Close Brothers

Shares in Close Brothers - one of the firms named in the bombshell case - tumbled after the judgment was released and it went on to suspend new car loans

MotoNovo also suspended new car loans - but has since resumed giving them out after considering the judgment

It comes as MPs prepare to grill the head of Britains finance watchdog over the scandal.

In a damning report last month, the Finance Conduct Authority ( FCA ) was found to be incompetent and dishonest was the bodys handling of the motor finance scandal continues to be dissected.

A cross-party parliamentary group made up of 30 MPs and 14 peers has been investigating the FCA for three years, before releasing the verdict of their probe on November 28.

Some 175 individuals, including ex-employees, scam victims and whistleblowers were spoken to, with the report concluding the financial regulator was not fit for purpose.

The FCA is seen as incompetent at best, dishonest at worst. Its actions are slow and inadequate, its leaders opaque and unaccountable, the report read.

Issues are rooted in the way the organisation is being led, conflicts of interest and the culture that the successive leadership teams have created.

Meanwhile, the shockwaves from the legal ruling continue to wreak havoc on Britains motoring lenders.

Close Brothers has suspended new car loans. Lloyds Black Horse lending division has stymied commission payments. MotoNovo, meanwhile, is back in business in giving out loans.

For Andrew Wrench, he just wants car dealers to clean their act up: that when they tell customers theyll work to get them the best deal, they mean it.

Mr Wrench continues: When I started this I had thought: "Am I going to lose?" Will they say, go away little postie from Stoke-on-Trent, and the other two, a student nurse and a supervisor? Were all just normal human beings that paid our way in life.

Its very sad to know that for many, many years this has been going on - but now its going to stop, and Ive been one of those parties that have been responsible for that.