BMW (ETR: BMW), the German carmaker, is staring down a bill of more than £600 million stemming from Britain’s widening motor finance mis-selling scandal.
Newly filed accounts from BMW’s British finance arm reveal the company has increased its mis-selling provision from £206 million in 2024 to £612 million in 2025, one of the largest exposures among lenders caught up in the crisis.
That figure surpasses the £430 million that Barclays expects to pay and the £320 million set aside by Close Brothers, another significant player in the car finance market.
Despite the scale of BMW’s liability, it remains far below the exposure faced by Lloyds Banking Group, which has provisioned £1.95 billion, making it the worst-affected lender in the scandal.
The Financial Conduct Authority announced a redress scheme in March covering approximately 12.1 million historic car loan deals, with drivers set to receive an average payout of around £830 if they were mis-sold car finance.
The scandal centers on commissions paid to car dealers for arranging loans, where lenders provided financial incentives that were never properly disclosed to borrowers.
The total cost of the FCA’s scheme is projected to reach £7.5 billion in payouts, with an additional £1.5 billion expected in administration costs across the industry.
The FCA’s scheme currently faces legal challenges from the UK motor finance arms of Mercedes-Benz, Volkswagen, and French bank Crédit Agricole, introducing significant uncertainty over the final outcome.
BMW itself acknowledged in its accounts that the final cost of the scandal could be “materially different” depending on the result of those legal challenges.
BMW Financial Services (GB), which arranges loans for buyers of the carmaker’s vehicles, swung to a pre-tax loss of £139 million last year, compared to a profit of £39 million in 2024.
BMW also earmarked an additional £25.5 million to cover loan agreements not captured by the FCA’s plans but where legal claims remain a credible risk.
FCA Deputy Chief Executive Sarah Pritchard cautioned that compensation payments are unlikely to reach consumers quickly, stating: “If the scheme goes ahead, the delay, we believe, will result in payments not before 2027.”
FCA Chief Executive Nikhil Rathi has further warned that the compensation scheme could be “struck down in whole or part” as a result of the ongoing legal challenges.
Consumer Voice, a campaign group backed by Courmacs Legal, is also leading one of the largest mass-claim motor finance actions, arguing the FCA’s scheme does not go far enough in compensating affected drivers.
A hearing on the various legal challenges is scheduled for either December 2026 or February 2027, with a BMW spokesman confirming the company will “continue to report in the normal way through scheduled BMW Group financial statements.”
