9:48 am, October 8, 2026
Volkswagen has put aside a whopping £725m to cover car finance compensation claims but bosses have warned that the final bill could still soar even higher.
The huge provision was revealed in accounts filed at Companies House by Volkswagen Financial Services (UK), wiping out the firm’s profits in the process.
The £725m provision is the largest disclosed by a carmaker so far and is the third biggest of any lender after Lloyds Banking Group and FirstRand Bank.
The eye-watering fee meant that the outfit slipped to a £485.9m loss last year, compared to a pre-tax profit of £136.1m in 2024.
Volkswagen has also warned that the final cost could ‘vary materially’ from its current provision because of its ongoing legal challenge against the FCA’s proposed redress scheme.
The German carmaker is one of three lenders challenging the FCA’s plans in the Upper Tribunal, alongside Mercedes-Benz’s UK finance arm and French bank Crédit Agricole.
Despite the challenge, a spokesman for Volkswagen Financial Services said it had still taken a ‘robust approach’ to planning for the proposed redress scheme and had made an appropriate provision.
The business added that it was continuing to seek clarification from the Upper Tribunal to ensure any eventual scheme was ‘lawful, fair and properly targeted’.
There is a possibility that the legal challenges could force the FCA to abandon or change its proposed scheme.
Lenders would still face complaints from customers if that happened, with the FCA warning that resolving claims outside its planned structure could cost the industry more than £6bn in additional costs.