Toyota’s UK motor finance business has disclosed a significant increase in liabilities as it prepares for potential payouts linked to an ongoing car loan mis-selling scandal affecting the broader motor finance industry. The Surrey-based subsidiary reported liabilities rising to £143.3 million for the year ending March 2026, up from £41.4 million the previous year, reflecting provisions set aside in anticipation of compensation costs.
The increase is connected to a wide-ranging issue identified by the Financial Conduct Authority (FCA), the UK’s financial regulator, which found that lenders had paid commissions to car dealers arranging finance that were not adequately disclosed to consumers. This practice has prompted the FCA to propose a redress scheme aimed at compensating affected motorists. The regulator estimates that the scheme could result in approximately £7.5 billion being paid out in compensation for some 12.1 million motor finance agreements made between 2007 and 2024, alongside additional costs of around £1.6 billion. Other major lenders such as Barclays and Lloyds Banking Group are also earmarking substantial sums to cover their potential share of these costs.
However, the FCA’s compensation plan is currently facing legal challenges from three lenders and a consumer advocacy group. These parties contend that the redress scheme may not adequately serve consumers or that the regulator's approach is flawed. Despite the uncertainty surrounding the scheme's future, Toyota has indicated in its accounts that, regardless of the court outcome, some level of financial outflow is expected. The company has warned that the true cost of redress could be materially higher or lower than the current provision, highlighting the unpredictability of the final settlement.
Toyota’s statement reflects a broader industry challenge as lenders grapple with delayed resolution and ongoing liability for historical mis-selling practices. The FCA began its market review in January 2024, triggering a wave of provisions by motor finance companies. Even if the regulator’s planned compensation framework is overturned, the companies in the sector acknowledge that they will still face demands for consumer redress stemming from the controversy.
As the legal proceedings continue, Toyota’s experience underscores the financial and reputational impact the scandal is imposing on car finance providers in the UK, illustrating the complex nature of regulatory enforcement and consumer protection in this segment of the market.