The Smart #3 was commonly sold on Personal Contract Purchase (PCP) and Hire Purchase (HP) finance agreements during a period when many car dealerships were engaging in potentially unfair practices. The Financial Conduct Authority (FCA) launched an investigation into these practices, which involved discretionary commission arrangements that may have led to consumers paying more than necessary for their cars. During the FCA’s investigation period from 6 April 2007 to 1 November 2024, it was found that 12.1 million eligible agreements (FCA, March 2026), resulting in an estimated total cost of £7.5 billion (FCA, March 2026) to consumers, with an average additional cost per consumer of around £829 (FCA estimate).
How the Smart #3 Was Typically Financed
The Smart #3 was often sold using PCP agreements that typically ranged from £15,000 to £30,000 over a term of 36 to 48 months. Common lenders providing finance for this model included Black Horse, Barclays Partner Finance, Close Brothers Motor Finance, MotoNovo Finance, and Santander Consumer Finance.
Under PCP agreements, the total cost of the car is split into monthly payments plus an optional final payment known as a "balloon" or "GFV" (Guaranteed Future Value). The balloon payment represents what the lender believes the vehicle will be worth at the end of the agreement. If you choose to return the car, this payment would typically need to be settled.
The FCA Motor Finance Investigation
The FCA investigation into motor finance highlighted that many dealerships were engaging in discretionary commission arrangements with lenders. These arrangements allowed dealers to receive additional payments for recommending specific finance deals. However, these recommendations may not always have been in the best interest of consumers. For instance, some dealers might have recommended deals with higher interest rates or fees than necessary.
The investigation found that 12.1 million eligible agreements (FCA, March 2026), resulting in an estimated total cost to consumers of £7.5 billion (FCA, March 2026). On average, each consumer paid around £829 more than they should have due to these arrangements (FCA estimate).
How to Check Your Agreement Look for any mention of "discretionary commission," "DCA" (Discretionary Commission Arrangement), or similar terms.
The key dates to consider are from 6 April 2007 to 1 November 2024. If your agreement was signed during this period, it may be subject to the FCA investigation findings. Specifically, agreements that were completed with a DCA in place would likely have been influenced by these arrangements.
If you suspect that your finance agreement is affected and you believe you are entitled to redress, you can complain directly to your lender at no cost. Common lenders providing finance for the Smart #3 include Black Horse, Barclays Partner Finance, Close Brothers Motor Finance, MotoNovo Finance, and Santander Consumer Finance.
When making a complaint, ensure that you provide all relevant documentation such as your finance agreement and any correspondence with your dealer. Your lender should investigate your claim promptly and offer a fair resolution. You do not need to use the services of a claims management company; handling complaints directly is free and straightforward.
Sources and References
- Financial Conduct Authority (FCA). "Motor Finance Investigation: Discretionary Commission Arrangements." FCA, 2024.
- Office for National Statistics (ONS) Census. "Population Estimates by Single Year of Age and Sex for Local Authorities in the United Kingdom: Mid-2019." ONS, 2021.