An investigation into mis-sold car finance is the latest compensation bonanza. At the end of the day you’ve only got yourself to blame

Britain has been on the lookout for the “next PPI” compensation free-for-all for a good few years now.

The widespread mis- selling of payment protection insurance ( PPI) for decades ended with more than 30m complaints lodged and a total of £38.3bn paid out.

The compensation bonanza reached fever pitch in 2019 when the deadline drew near and complaints were being thrown in by chancers who had no idea if they had ever been sold PPI and were just hoping for the best.

Granted, PPI was a genuine scandal where consumers could never actually claim on the insurance they had paid for. But since then, challengers for “the new PPI” title have included equity release, Help to Buy and timeshares. Right now, the leading contender for the “new PPI” crown is car finance.

Money Saving Expert Martin Lewis declared it to be “huge” news last month when the Financial Conduct Authority announced it was investigating potentially “widespread misconduct” by car dealers and credit brokers who may have sold finance at higher rates in return for extra pay from lenders. Mr Lewis reckons the compensation owed could be on the same scale as PPI and urged anyone who thinks they have been mis-sold to register a complaint now “as a marker”.

It makes one wonder how much of this has so far been driven by claims management lawyers, eager to find the next big payday. I fear this latest hype is more about compensation culture than righting any wrongs.

Car finance is rarely a smart financial decision. Years ago, you would drive a car you could afford. Your first car would be an old banger that did the job and cost very little to insure. New cars were for the wealthy only, and besides, why would you pay vast sums for a car that is only needed to get you from A to B? Now, new BMWs, Range Rovers and Audis line the streets and driveways of even the most rundown areas.

Car finance enables those who cannot afford a new luxury car to have one – regardless if it is good idea for them. The value of a new car is hardly a precise science. The value of new models can fall by as much as 40pc in the first year, the AA says. The truth is that drivers willing to pay a premium for a new car are offered a price and only if they are willing to pay it, a deal is struck.

As long as prices are clearly displayed and comparable, consumers should be left to make their own mistakes.

Do not sign on the dotted line if you do not know what you are paying for. If it turns out you’ve paid over the odds for magic beans, it is no one’s fault but your own. We should, of course, have a robust system in place that means consumers cannot be wilfully misled and ripped off, but we have to draw the line somewhere. Victims of bank transfer fraud – where people are tricked into sending money to a scammer’s account – are now almost guaranteed to get their money back from their bank. Just like in America, your carelessness can always be argued to be someone else’s fault.

The best way to avoid the “next PPI” scandal will be for consumers to pay closer attention and take responsibility for their decisions. Until then, the only winners will be ambulancechasing lawyers.

‘Years ago your first car would be an old banger. Now, new BMWs and Audis line the streets’