Car manufacturers including Ford, Hyundai and BMW are facing multibillion-pound payouts to customers after the UK’s financial watchdog said the industry could be liable for nearly half of an £11bn compensation bill linked to the car finance scandal.
According to the Financial Conduct Authority (FCA), captive lenders, the finance arms of carmakers may have to pay about 47% of the total redress, or roughly £5.2bn, to drivers who were overcharged through unfair commission schemes.
Also, banks such as Lloyds, Santander UK and Barclays are expected to cover 51% of the costs, with independent lenders contributing the remaining 2%.
The FCA’s proposed redress scheme follows a Supreme Court ruling in August that upheld consumer complaints about hidden commissions in car loans.
The regulator estimated total compensation at £8.2bn, with an additional £2.8bn in administrative costs. Around 14 million affected borrowers could receive payouts averaging £700 each.
While the final total could reach £12.4bn if all eligible claims are made, it remains below earlier projections of up to £18bn. The FCA said most carmakers were financially robust enough to absorb the impact, noting their access to funding and global parent-company support.
However, industry representatives warned the scale of the payouts could disrupt the car finance market. The Finance and Leasing Association said the redress could force some lenders to raise borrowing costs or even exit the sector.
Several motor makers have already begun preparing for the compensation scheme. Hyundai Capital UK has set aside £34.5m, Honda Finance Europe £62.2m, and BMW’s finance arm £200m.
Honda Finance Europe said it was “working through the FCA consultation paper to understand the next steps” and pledged to continue assisting affected customers.
Consumer groups and lenders have until later this year to respond to the FCA’s consultation before the scheme is finalised.
