Three of the world's biggest carmakers have revealed they are setting aside more than £1.5 billion between them to cover compensation for Britain's motor finance mis-selling scandal, underlining the vast scale of an affair being described as the worst consumer finance scandal since payment protection insurance.
Volkswagen has warned it is bracing for a £725 million compensation bill, the largest provision disclosed so far by a carmaker. Accounts filed at Companies House by the German group's British motor finance subsidiary, based in Milton Keynes, showed the business slumped to a £485.9 million pre-tax loss last year, from a £136.1 million profit in 2024, as a result of the sum set aside.
BMW's UK finance business is facing a potential bill of more than £600 million. Newly filed accounts showed BMW Financial Services (GB) increased its provision to £611.6 million for 2025, up sharply from £206 million a year earlier, pushing the operation to a £139.3 million pre-tax loss compared with a £39.1 million profit the previous year.
The UK motor finance arm of Stellantis, the group behind Vauxhall, Fiat and Jeep, has set aside £221.3 million, up from £37.1 million at the start of the year, pushing the Surrey-based subsidiary to a £69.3 million pre-tax loss from a £69.4 million profit in 2024. The company, a joint venture with the French bank BNP Paribas, warned that significant uncertainty remains regarding the ultimate cost.
The controversy centres on commissions that lenders paid to car dealers for arranging finance on vehicle purchases, under arrangements that were not properly disclosed to buyers. A Financial Conduct Authority investigation concluded that there was widespread unfairness: commissions were often too high, dealers had a conflict of interest in setting interest rates, and customers were kept in the dark.
The regulator estimates that 12.1 million motor finance deals agreed between 2007 and 2024 will be eligible for redress, with lenders paying about £7.5 billion in compensation plus a further £1.6 billion in administrative costs. It ranks behind only Lloyds Banking Group, which has earmarked almost £2 billion, and South Africa's FirstRand among all lenders.
The industry is fighting back. The UK motor finance arms of Mercedes-Benz, Volkswagen and the French bank Credit Agricole are contesting the FCA's compensation scheme in court, alongside the consumer group Consumer Voice, which argues the plan shortchanges motorists. A preliminary hearing in the legal challenge has begun, and lenders caution their final bills could vary materially from current provisions.