BMW's UK car finance business has set aside more than £200 million to cover potential costs from the ongoing motor finance scandal. The German carmaker increased its provision to £206.9 million by the end of 2024, up significantly from £70.3 million the previous year.
The move makes BMW the latest car firm to reveal potential costs from the industry-wide scandal affecting millions of drivers. Customers who took out car loans between 2007 and 2020 are expected to be eligible for compensation claims.
Regulatory action and redress scheme
The Financial Conduct Authority (FCA) is currently consulting on an industry-wide redress scheme for affected consumers. The regulator believes many banks and motor finance firms broke the law by failing to properly disclose commission payments to dealers, potentially resulting in unfair interest rates for customers.
The FCA announced earlier this month that it hopes to begin redress payments to affected customers next year. BMW said it has received complaints related to historical commission, with some cases currently being examined by the Financial Ombudsman Service.
Financial uncertainty remains
BMW stressed there remains "considerable uncertainty" regarding the outcome of redress claims. The company warned that actual costs could be "materially less than or greater" than its current provision.
The carmaker's provision covers compensation payments, administration costs and legal costs. BMW indicated that a five per cent increase in potential payouts would require an additional £31 million provision.
Recent legal developments
The accounts were signed off before a major Supreme Court verdict last month regarding the scandal. The ruling partly sided with the industry and avoided a worst-case scenario for motor finance firms.
BMW's financial filing with Companies House revealed the scale of potential exposure to the historic commission claims scandal.
Sources used: "PA Media" Note: This article has been edited with the help of Artificial Intelligence.
