The UK motor finance arm of Mercedes-Benz has plunged right into a £365 million loss after setting apart a whole lot of thousands and thousands of kilos to cowl potential compensation linked to the mis-selling of automotive loans.
Accounts filed for Mercedes-Benz Monetary Companies UK, based mostly in Milton Keynes, present the enterprise swung to a £364.6 million loss in 2024, in contrast with a £69.6 million revenue the earlier yr, after reserving further costs associated to improperly disclosed fee preparations.
The availability of £423.8 million is the most important disclosed to this point by any automotive producer, underlining the rising monetary impression of the motor finance redress scandal, which Monetary Conduct Authority estimates might price the trade round £11 billion.
The FCA stated in October that thousands and thousands of motorists could possibly be entitled to compensation averaging about £700 per settlement, after discovering that lenders and brokers did not correctly disclose fee funds on automotive finance offers stretching again to April 2007.
Whereas the regulator has proposed a sector-wide redress scheme, lenders and finance suppliers have mounted a fierce backlash, arguing that the size of compensation is disproportionate. The FCA’s session closed final month, with ultimate guidelines anticipated in February or March. Authorized motion stays attainable if companies problem the result.
Mercedes-Benz revealed in October that it had already put aside €422 million (£368 million) at group degree. The newest UK accounts present a £395 million cost taken in 2024 alone, on high of £28.8 million beforehand reserved, bringing the entire UK provision to £423.8 million.
Mercedes is just not alone in dealing with a considerable hit. Lloyds Banking Group has earmarked £1.95 billion to cowl potential redress prices, whereas BMW Monetary Companies UK has put aside almost £207 million.
The dimensions of Mercedes-Benz Monetary Companies UK’s loss highlights how deeply embedded motor finance commissions had been throughout the trade, and the way expensive the fallout could but change into.
Because the regulator prepares to finalise its redress framework, the episode is shaping up as some of the vital shopper finance scandals in current UK historical past, with far-reaching penalties for banks, carmakers and debtors alike.
