Redress repercussions and soaring EV interest

The fallout from the Financial Conduct Authority’s motor finance redress scheme has been instant and dramatic. The ruling brings clarity to 12.1 million hire purchase agreements written between 2007 and 2024, and lands a £7.5 billion bill at the foot of lenders.

FirstRand announced plans to sell Aldermore in response to the final details of the scheme, which it branded “disproportionate and unfair,” having increased its provision for compensation payments to £750 million.

Lloyds Bank, the UK’s largest motor finance lender via its Black Horse subsidiary, also disagreed with the FCA’s ruling, but has decided not to mount a legal challenge.

But there is still time for other parties to launch an appeal, with experts describing the verdict as “regulatory overreach.”

Watch Finance Connect’s insightful webinar on-demand – ‘Everything you need to know about the FCA redress scheme, and what you should do next’ – here.

Moreover, Claims Management Companies had anticipated redress payments of about £1,500 per claim, whereas the FCA expects average compensation to be £829, so a challenge from CMCs is possible.

The FCA appears to be taking a tougher line with CMCs, and has set up a task force alongside the Solicitors Regulation Authority, Information Commissioner’s Office and Advertising Standards Authority to tackle poor handling of motor finance claims.

A task force of a different type is aiming to reopen the Strait of Hormuz, with the disruption to global oil supplies leading to a spike in pump prices that is having a direct impact on the UK’s new and used car market.

Autotrader has reported new electric car sales leads are up 28% in less than a month, and used EV leads up 15%, as motorists balk at paying over £1.50 per litre for petrol.

And Octopus Electric Vehicles has tracked a 36% jump in enquiries for EV leasing since the start of the conflict in the Middle East. However, used EV residual values continue to suffer, with prices 10% cheaper than comparable internal combustion engine vehicles, according to the AA’s latest EV Readiness Index.

FleetCheck says the conflict in Iran could push more fleet operators towards EVs, with fuel savings tipping the balance in favour of EVs.

Rightcharge’s new ‘Gold Card’ offers fleets discounted tariffs across four major public charging networks, promising savings of 35%.

The question is whether this burgeoning interest in battery-powered vehicles will be sustained when oil prices settle.

The UK government has unveiled a £1 billion funding package to help businesses transition to electric vans and trucks, offering grants to offset the higher cost of EVs, as well as financial support for firms looking to install depot charging infrastructure.

But new van sales fell in the busy month of March, and the share of electric vans dropped to 7.1%, well short of the 24% share required by the Zero Emission Vehicle Mandate for 2026.

The new car market recorded its strongest March since the pandemic, buoyed by retail buyers, but battery electric vehicles accounted for just 22.6% of the market, well shy of the 33% demanded by the ZEV Mandate.