Toyota braced for motor finance pay out as ruling nears
Toyota has set aside millions in case the Supreme Court rules the company and the wider industry should pay customers compensation when it delivers its verdict on the motor finance saga in the coming weeks.
The UK-based financial services arm of the car giant has earmarked the funds to shore itself up in the eventually the case goes against it and the industry as a whole.
The Supreme Court is expected to deliver its verdict on the motor finance case in July.
Depending on the result the Financial Conduct Authority (FCA) would then announce plans for a potential redress scheme within the following six weeks.
The Supreme Court heard the case in April following the Court of Appeal deciding in October 2024 that it was unlawful for the brokers – who were also the car dealers – to receive a commission from the lender providing motor finance without obtaining the customer’s informed consent to the payment.
According to its latest financial results, which have just been filed with Companies House, Toyota Financial Services (UK) has set aside almost £70m which has been classed as ‘other’ liabilities. The total is up from £54.1m in the prior 12 months.
The business has not said how much of this figure has been specifically earmarked for any possible future pay out.
Other liabilities which have been earmarked by the company, and which would not be put towards any possible motor finance pay out, include £415m inter company liabilities.
Earlier this month, the FCA pledged any redress scheme it may implement on the motor finance industry must keep the market afloat.
The watchdog said ensuring the integrity of the motor finance market, so it works well for future consumers, would be crucial framework for a redress scheme.
Analysts at RBC predict total provisions for the motor finance scandal could top £30bn.
The Treasury had previously tried to interject in the case, over fears the fallout could cause devastating damage to the banking industry.
Lloyds Banking Group leads for the steepest amount reserved at £1.2bn. Santander is on the hook for £295 and Close Brothers £165m.
Toyota: Outcome of motor finance case ‘remains highly uncertain’
A statement signed off by the board said: “Whatever the ruling of the Supreme Court, management are of the opinion that an economic outflow is probable, most likely resulting in an industry-wide consumer redress scheme.
“At the balance sheet date the company has made adequate provision with the information it has available.”
Toyota added: “The outcome remains highly uncertain and the actual cost maybe materially higher of lower than the provision recorded.”
The accounts also show that Toyota Financial Services (UK)’s revenue increased in the year from £941.7m to £1.1bn while its pre-tax profit also rose from £148.8m to £196.5m.
The company’s revenue had been £573m in the year to 31 March, 2023.
Toyota Financial Services UK is headquartered in Surrey and also operates subsidiaries in Italy, Slovakia, Czech Republic, Finland, Kazakhstan, Hungary, Denmark, Ireland, The Netherlands and through an associate in South Africa.
The division is separate to the UK arm of Toyota which handles car sales instead of motor finance contracts.
The latest accounts for Toyota (GB) Plc are expected to be filed with Companies House by the end of September.