BMW is confronting a bill exceeding £600m from the UK’s motor finance mis-selling scandal, placing it among the hardest-hit lenders in the industry.
Newly filed accounts from the German carmaker’s British finance arm show its provision for mis-selling claims jumped from £206m in 2024 to £612m in 2025.
The revised figure surpasses the £430m that Barclays expects to pay out and the £320m set aside by Close Brothers, another significant car finance lender.
Despite the scale of BMW’s exposure, it remains well below the liability faced by Lloyds Banking Group (LLOY.L), which has provisioned £1.95bn to cover claims.
The Financial Conduct Authority announced a redress scheme in March covering approximately 12.1 million historic car loan deals, awarding affected drivers an average of around £830 each.
The scandal centres on undisclosed commissions paid by lenders to car dealers for arranging financing agreements with customers who were not properly informed.
The FCA estimates the total scheme will cost lenders £7.5bn in compensation payouts, with an additional £1.5bn set aside for administration costs.
Legal challenges from the UK motor finance arms of Mercedes-Benz, Volkswagen, and French bank Crédit Agricole are now threatening to delay or reshape the entire redress programme.
BMW warned in its accounts that the final cost of the scandal could be “materially different” depending on the outcome of those ongoing legal challenges.
The carmaker also set aside an extra £25.5m to cover loan agreements not captured by the FCA’s scheme, but where residual legal risk still exists.
BMW Financial Services (GB) reported a pre-tax loss of £139m last year, a sharp reversal from the £39m profit it recorded in 2024.
FCA Deputy Chief Executive Sarah Pritchard cautioned that the legal challenges are expected to push back payments significantly, saying: “If the scheme goes ahead, the delay, we believe, will result in payments not before 2027.”
FCA Chief Executive Nikhil Rathi also warned this year that the compensation scheme could be “struck down in whole or part” as a result of the ongoing legal proceedings.
Consumer Voice, a campaign group supported by Courmacs Legal, is leading one of the largest mass-claim motor finance actions, arguing the FCA scheme does not go far enough for affected drivers.
A hearing on the legal challenges is scheduled for either December 2026 or February 2027, leaving significant uncertainty over the final shape and timeline of the redress programme.
