In the wake of a landmark Appeal Court ruling, the UK car finance industry is grappling with significant disruption as major lenders temporarily suspend new finance deals.
The unexpected decision has placed lenders under greater liability for non-disclosure of commission payments, leading to urgent consultations with regulators and ministers to find a swift resolution.
The court’s verdict, which imposes a duty on brokers to disclose the commission they receive to customers explicitly, has shaken the industry. At least three prominent finance providers—Close Brothers, MotoNovo, and Honda Finance Europe—announced immediate halts to new credit approvals, while others like BMW, Secure Trust Bank, Blue Motor Finance, and Zopa are also understood to have paused lending.
Gary Greenwood, a finance analyst at Shore Capital, warned of an imminent standstill in car sales, with financing accounting for the majority of new and used vehicle purchases. “There is a very real risk that the industry could grind to a halt,” he said. Lenders, he explained, are currently “too wary to provide credit to customers.”
With around 5,200 new cars sold daily in Britain—most financed by credit arrangements—the potential impact on the automotive sector and the broader economy is severe. Stephen Haddrill, director-general of the Finance and Leasing Association (FLA), criticised the ruling’s timing, coming just before a government budget aimed at stimulating growth. “This judgment undermines the assertion that the UK is becoming a more investible place for business,” Haddrill commented, adding that European counterparts are bewildered by the decision, as Britain’s credit regulations are already among the strictest.
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