The next twist in the commission disclosure saga

With industry experts now anticipating a compensation bill of less than half their original £30bn estimates, the sentiment is growing that car finance owners now have sufficient clarity to start preparing for the sale of their businesses.

Around 30 million finance agreements signed between 2007 and 2020 are under scrutiny, of which around 14 million are likely to be eligible for some form of compensation, according to the FCA. It expects payments to start next year.

Stellantis Financial Services UK has become the latest auto finance provider to make a provision (£37 million) for compensation payments, following Lloyds Bank (£1.15bn), Santander (£295m) and BMW’s UK financial services division (£70m).

Meanwhile, Barclays has withdrawn its Court of Appeal hearing against a Financial Ombudsman Service (FOS) decision relating to commission payments, with the bank saying it will now await the FCA decision on an industry-wide redress scheme.

The FCA is warning that these third parties could cost consumers up to 30% of any compensation paid.

Regulation of a different kind comes into force at the end of this year, when new accounting rules will bring contract hire and operating leases onto balance sheets. From January 1, 2026, UK GAAP (Generally Accepted Accounting Practices) will align with international standards. The change is likely to see finance and tax teams demand greater visibility into the interest rates and charges within their leases.

August is traditionally the quietest month of the year for new vehicle sales, as buyers wait for the new registration plate. While sales were down slightly (-2% vs August 2024), they remain up 2.1% for the year-to-date, marking the best performance since Covid-19.

However, an increasing number of cars now qualify for some form of electric car grant, under the Government’s £650 million subsidy scheme.

The Government has also acknowledged the massive differential between home and public charging costs, with HMRC allowing drivers of electric company cars to claim 75% more in mileage reimbursement for business journeys if they recharge their cars at public charging stations.

After months of terrible losses on BEV residual values, there are early indications that the used car trade is starting to accept BEVs, according to the Startline Used Car Tracker. It found that 53% of dealers believe buyers are becoming more comfortable with battery-powered cars, while 51% say BEVs are increasingly viewed as “just another car.”

In the wider used car market, Autotrader has tracked the first year-on-year price increase in two years, although the uplift was due to older cars. Prices of nearly new cars under 12 months old declined by -1.5% year-on-year, while one-to-three-year-old models dropped by 2% in August.

The light commercial vehicle market is also experiencing a difficult time, with new sales down -13.3% for the year to August.

Falling new van sales spells positive news for rental companies, with Europcar reporting that businesses are keen to access short- and medium-term rental to fill their fleet gaps, rather than make long-term lease or purchase commitments.