potential customers inspecting a Motability vehicle (AP £26895) at a roadshow
Motability has been in the news a lot with the scheme under attack from right wing press such as Richard Littlejohn and Tom Harwood, much of it in effect aimed really not so much about Motability itself but at the wider disability benefits system. In turn, this has generated defences of the scheme, suggesting "nothing to see here".
However, the scheme which has grown massively in recent years absolutely does need fresh scrutiny - not only from the perspective of its value for money to taxpayers, but equally for its fairness to disabled people. Motability first came seriously under the spotlight in 2018 when the National Audit Office reviewed the scheme following reports of grossly-excessive executive pay, the accumulation of inflated reserves and opaque governance. This review resulted in a number of modernising changes for example refreshing the Trustees of Motability Foundation which had become an old boys’ club.
However, the business model of Motability Operations (the monopoly commercial arm of the scheme which is owned by financial institutions), remains unchanged: buying new cars at discounted, VAT-exempt prices; leasing them to customers over three years: and then re-selling them on the secondhand car market. And year after year - until last year) it continued to rack up surpluses of the hundreds of millions of pounds.
Year ending pre-tax profit (loss) * Donations to MF*
2021 556 170
2022 923 200
2023 604 250
2024 (416) -
* £ million
In addition to acquiring ever-increasing reserves, Motability Operations also made big donations to the Motability Foundation - again, in the hundreds of millions of pounds. The Foundation. which is supposed to control the scheme. has consequently become one of the richest charities in the UK, with assets now reaching over £2 billion. These have doubled since the NAO report.
However, the scheme which has grown massively in recent years absolutely does need fresh scrutiny - not only from the perspective of its value for money to taxpayers, but equally for its fairness to disabled people. Motability first came seriously under the spotlight in 2018 when the National Audit Office reviewed the scheme following reports of grossly-excessive executive pay, the accumulation of inflated reserves and opaque governance. This review resulted in a number of modernising changes for example refreshing the Trustees of Motability Foundation which had become an old boys’ club.
However, the business model of Motability Operations (the monopoly commercial arm of the scheme which is owned by financial institutions), remains unchanged: buying new cars at discounted, VAT-exempt prices; leasing them to customers over three years: and then re-selling them on the secondhand car market. And year after year - until last year) it continued to rack up surpluses of the hundreds of millions of pounds.
Year ending pre-tax profit (loss) * Donations to MF*
2021 556 170
2022 923 200
2023 604 250
2024 (416) -
* £ million
In addition to acquiring ever-increasing reserves, Motability Operations also made big donations to the Motability Foundation - again, in the hundreds of millions of pounds. The Foundation. which is supposed to control the scheme. has consequently become one of the richest charities in the UK, with assets now reaching over £2 billion. These have doubled since the NAO report.
Motability Foundation Assets
All these surpluses - whether reserves from Motability Operations or donations to Motability Foundation - derive directly from disabled customers who pay more for leases than is needed to cover the scheme’s costs. However, they also derive from government subsidy in the form of the big tax exemptions (VAT and Insurance Premium Tax) which enable Motability to offer leases below commercial market rates. As the scheme has expanded, and as more expensive, often electric, cars are promoted through the scheme, the revenues foregone by the Treasury through these tax exemptions have also ballooned. The NAO estimated the value of these tax concessions at up to £888 million in 2017; the current value will be in the £billions.
Which brings us to the latest twist in Motability’s story. Last year, for the first time in recent memory, Motability made a heavy loss, in contrast with the recent record of multimillion pound surpluses. This loss appears to be largely because of falling resale prices of secondhand cars. (Most of the value of Motability Operations’ assets are in the form of the vehicles it owns). In recent years, Motability Operations has heavily promoted Electric Vehicles, with Chairman Sir Stephen O’Brien stating Motability Operations’ goal in its 2024 annual report as how “we navigate the UK’s transition to electric.”
The UK car industry is struggling to meet government targets for EV sales, and Motability’s mission seems to have shifted. Its chief focus seems now to be not meeting the mobility needs disabled people, but rather supporting the UK car industry during challenging market conditions associated with the EV revolution. When the NAO investigated Motability in 2018, Motability accounted for 1 in 10 of all new car sales in the UK. Astonishingly, in a few short years, this has risen to 1 in 5. With further instability on the horizon through tariffs, Motability’s role in the motor industry will only grow in importance.
Motability Operations warns that the £416 million loss announced in its 2024 Annual Report will lead to higher lease prices - i.e. it will be disabled people who bear the cost. When Motability makes money, the surplus goes to reserves or to the Motability Foundation; when it loses money, customers are charged more. Either way, disabled people pay. If the Government wants to subsidise the UK car industry, let it do so, But why should disabled people be expected to?
Which brings us to the latest twist in Motability’s story. Last year, for the first time in recent memory, Motability made a heavy loss, in contrast with the recent record of multimillion pound surpluses. This loss appears to be largely because of falling resale prices of secondhand cars. (Most of the value of Motability Operations’ assets are in the form of the vehicles it owns). In recent years, Motability Operations has heavily promoted Electric Vehicles, with Chairman Sir Stephen O’Brien stating Motability Operations’ goal in its 2024 annual report as how “we navigate the UK’s transition to electric.”
The UK car industry is struggling to meet government targets for EV sales, and Motability’s mission seems to have shifted. Its chief focus seems now to be not meeting the mobility needs disabled people, but rather supporting the UK car industry during challenging market conditions associated with the EV revolution. When the NAO investigated Motability in 2018, Motability accounted for 1 in 10 of all new car sales in the UK. Astonishingly, in a few short years, this has risen to 1 in 5. With further instability on the horizon through tariffs, Motability’s role in the motor industry will only grow in importance.
Motability Operations warns that the £416 million loss announced in its 2024 Annual Report will lead to higher lease prices - i.e. it will be disabled people who bear the cost. When Motability makes money, the surplus goes to reserves or to the Motability Foundation; when it loses money, customers are charged more. Either way, disabled people pay. If the Government wants to subsidise the UK car industry, let it do so, But why should disabled people be expected to?
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