The short, medium and long-term outlooks for UK auto finance

Firstly, the British Business Bank invested £25 million in UK-based autonomous driving specialist Wayve, as part of a $1.2 billion Series D funding round. The bank has set out its stall to provide stronger domestic backing for the nation’s most promising technology firms to start, scale and stay in the UK. 

The announcement followed news that almost half of UK drivers (47%) would be willing to rent out their car to a stranger through an Airbnb-style arrangement. This mindset of usership rather than ownership is likely to underpin the uptake of shared autonomous vehicles.

But long before self-driving cars can take to UK roads, lenders have to survive the crash in electric vehicle residual values and navigate the redress scheme for not properly informing customers about commission arrangements in their motor finance agreements.

Despite the government extending for another year and increasing the value of its Electric Vehicle Chargepoint Grant for renters, flat owners, households without driveways, landlords, businesses, schools, charities and public sector organisations, more than half of used car dealers believe EV prices and residual values could deteriorate further this year, according to new research from the Startline Used Car Tracker. Dealers expect the imbalance between the supply of used EVs and consumer demand to continue.

The study found insufficient advantages for private buyers to choose an EV over traditional alternatives, whereas company car drivers and salary sacrifice customers win handsomely from the supportive benefit in kind tax treatment of zero emission cars.

Furthermore, the prospect of electric Vehicle Excise Duty (eVED) looms on the horizon, with an additional pence per mile charge for EVs to compensate the Government for lost fuel revenues. Alphabet warns that the EV market remains sensitive, and that a new tax could dampen demand.

But used car dealers are stocking used models from new entrant Chinese brands in ever greater numbers, with 45% of forecourts retailing these models. Dealers report that the cars represent good value for money and sell quickly.

Consumer car finance for all types of used cars declined in 2025 compared to the previous year, although funding for new vehicles was 8% higher than in 2024, lifting the market.

Lenders are now awaiting the Financial Conduct Authority’s final rules for the compensation of car buyers deemed to have been treated unfairly in motor finance deals. The FCA has indicated that the first redress could be paid this year via a streamlined scheme, following proposals drawn up jointly by the FCA and Financial Ombudsman Service.

The FCA has also suggested that firms may be given five months to deal with older claims and three months for more recent agreements, while also lifting some of the burden on lenders to contact customers.

The size of the compensation bill, however, remains eye-watering, with Viceroy Research suggesting that Close Brothers, just one of the lenders caught up in the issue, might need to double its existing provision of £300 million to a sum between £572 million and £1.07 billion.

The Supreme Court’s ruling on commission disclosure has led to four principal trends emerging in motor finance, according to iVendi. These are the emergence of new finance structures for dealers, a growing move towards price-comparison style searches, increased use of finance pre-approval, and changes to how value-added products are designed and sold.