Motability profits dive due to falling used car values

Profits dropped significantly last year at the UK’s largest fleet owner – Motability Operations Group – in line with tumbling used car prices.

As a leasing supplier to individuals receiving disability benefits, Motability accounts for just over one in 10 of every new cars registered and remarketing end-of-lease cars via its MFL Direct division to franchised dealers 

The latest figures for 2023 demonstrated a 35% decline in pretax profits, dropping from £1.1 billion in 2022 to £748 million in 2023 despite revenues reaching £5.5bn increasing from £4.7bn last time. Turnover growth was fuelled by customer numbers growing to 110,551 in 2023, resulting in an 8.9% increase in its fleet. Leased car asset values stood at £11.7bn in September with an unguaranteed residual value of £10.2bn.

Even so, profit from the sale of cars decreased from £723.4m in 2022 to £678.1m in 2023, fuelled by a 10% fall in used car prices during the last quarter of the year.

Motability cautioned that even a small change in used car prices could significantly impact the business and is now committed to evaluating fleet value quarterly in order to recalibrate depreciation to reflect further movements in residual values.

“A 1% movement in used car values would impact us by £102m,” it said. “This means that whilst we hold capital reserves to provide protection against unexpected downside movements in values so we can insulate customers from these financial impacts, any positive movements can lead to above target profitability.”

Motability said it was also setting aside £300m to assist customers in transitioning to electric vehicles (EVs) which includes working with manufacturers to offer longer-range EVs and subsidising home chargers.

“To date,” it explained, “we have invested over £130m of the £300m to support affordability. We cover the cost of installation of a home chargepoint and offer all car and customers using wheelchair accessible vehicles a new vehicle payment of £750 to support affordability.”

In 2018 the organisation, which administers the scheme on behalf of the charity Motability, was criticised by the National Audit Office for inadequate governance and making high levels of unplanned profit and large financial reserves, leading to its then chief executive to step down.

The NAO found at the time that Motability's customers had been charged £390m more than was required to cover lease costs, and it was holding £2.62bn in reserves - significantly higher than major car leasing companies.