Mercedes-Benz's UK motor finance arm has plunged into losses of £365 million after setting aside hundreds of millions of pounds to cover potential compensation linked to the mis-selling of car loans.
Accounts filed for Milton Keynes-based Mercedes-Benz Financial Services UK show the business suffered a loss of £364.6 million in 2024, after booking extra charges related to improperly disclosed commission arrangements, compared with a profit of £69.6 million the previous year.
The £423.8 million provision is the largest ever disclosed by any carmaker, underscoring the growing financial impact of the motor finance prevention scandal, which the Financial Conduct Authority estimates could cost the industry around £11 billion.
The FCA said in October that millions of motorists could be entitled to compensation averaging £700 per agreement after finding that lenders and brokers failed to properly disclose commission payments on car finance deals until April 2007.
While the regulator has proposed a sector-wide redress scheme, lenders and finance providers have reacted angrily, arguing that the scale of compensation is disproportionate. The FCA's consultation closed last month, with final rules expected in February or March. Legal action is possible if companies challenge the results.
Mercedes-Benz revealed in October that it had already set aside €422 million (£368 million) at group level. The latest UK accounts show charges of £395 million taken in 2024 alone, on top of the £28.8 million previously reserved, taking the total UK provision to £423.8 million.
Mercedes is not alone in taking a substantial beating. Lloyds Banking Group has set aside £1.95 billion to cover potential remediation costs, while BMW Financial Services UK has set aside about £207 million.
The scale of Mercedes-Benz Financial Services UK's losses highlights how deeply embedded the motor finance commission was throughout the industry, and how costly its consequences may still be.
As the regulator prepares to finalize its redress framework, the episode is shaping up to be one of the most significant consumer finance scandals in Britain's recent history, with far-reaching consequences for banks, carmakers and borrowers alike.
Amy Ingham
Amy is a newly qualified journalist specializing in business journalism with responsibility for news content at Business Matters, the UK's largest print and online source of current business news.