The financial services regulator will consult on a redress scheme for motorists following a court ruling, though many drivers will be ineligible.

A compensation scheme to pay out drivers who were mis-sold car loans could cost as much as £18 billion, the financial regulator has said. Millions of drivers were denied payouts on Friday after the Supreme Court ruled that lenders are not liable for hidden commission payments in car finance schemes.

Any future motor finance compensation scheme for consumers in Britain would be substantially smaller than the payment protection insurance (PPI) redress scheme that cost banks tens of billions of pounds,