Drivers who bought a car on finance could share billions of pounds in compensation following a benchmark test.

When Marcus Johnson, 34, from Cwmbran, Torfaen, bought his first car – a Suzuki Swift – in 2017, he was not told the car dealer was being paid a 25% commission, which added to what he had to pay.

In a landmark case with two other claimants, the Court of Appeal ruled in October that the finance company should pay the hidden fee plus interest back to Mr Johnson, and he is now to receive just over £3,200.

Trade Center Wales and MotoNovo finance’s parent company, FirstRand, did not respond to requests for comment.

Mr Johnson said he was “furious” when he found out what had happened, adding: “I paid £1,650 for what I can only describe as showing around the showroom for 10 minutes and then printing a bit of paper.

“I signed some documents and then drove away.”

He said he had no choice but to use the finance when he bought the car, describing it as “heartbreaking” to find out so much extra money had been taken.

“Someone in my situation at that time, not being able to buy that kind of old car with cash, you would use finance,” he added.

“And so that companies can be allowed to collect these ridiculous amounts of commission without disclosing it, without me and thousands of other people being aware of it at all.”

Mr Johnson had bought the car from the Trade Center Wales dealership for £4,600 and the company arranged finance with Cardiff-based MotoNovo Finance.

He was not informed that the dealership was receiving £1,650 in commission, which was around 25% of the total loan.

The auto finance industry is setting aside huge sums of money to settle possible similar claims in the future.

Mr. Johnson sold Suzuki Swift in 2020.

But after three years of regular payments, he still owed £3,500, which he assumed was then car loan interest.

“By paying the agreement for three years, we’ve only scratched the surface,” he said.

Dealers were not acting outside of industry rules and regulations by taking this type of commission at the time, but they had a duty to inform their customers and inform them of the commission.

The Court of Appeal said that “burying such a statement in fine print which the creditor knows is highly unlikely to be read by the debtor will not suffice.”

There have been changes to the rules governing commissions since 2021, when the Financial Conduct Authority banned discretionary commission arrangements.

Kevin Durkin, of HD Law, who represented Mr Johnson in the test case, said: “As a financial reward for being elected, FirstRand Bank paid Trade Center Wales a commission that Marcus knew nothing about.

“There was only a vague reference to this arrangement in the documents which the appeal court found to have been buried.

“As such, it meant that Marcus paid more than he necessarily had to.”

He added that it was far from an isolated case, with many car dealers and finance companies acting this way.

“It’s completely pervasive,” he added.

“Almost all cars that are purchased on finance through a dealer or credit broker are sold this way.

“I have yet to see any terms and conditions in a case involving my clients where the reference to the terms and conditions is either absolute as to ‘we will get a commission’ or, alternatively, is highlighted in the documents that are signed. “

Mr Johnson said he would never use a funding agreement again, but was delighted when the Court of Appeal ruled in his favour.

“It was a big moment of relief and excitement and obviously happiness all at the same time – especially with how tough things are right now,” he said.

He hopes others will get their money back, too. adding: “I’m so happy that my case and the decision that was made could help thousands of other families, to me that’s worth more than the money I somehow got back.”