Some of the auto companies stopped finance sales completely, albeit temporarily, while their lawyers worked out what the consequences of the judgement were. Most have resumed activity, but they admit the solutions they have adopted are sticking plasters. Uncertainty hangs over the market.
True, we will have to see how it all plays out. The banks and finance companies may be able to appeal, or at least wriggle out of some of the financial costs. And of course we can all argue about whether the customers deserve compensation (the simple answer, for what it is worth, is that they probably do).
But the bigger point is surely this: the car market can’t exist without credit. Almost no one can afford to pay for a new vehicle in cash: even a Ford Puma, the UK’s best-selling car, will set you back at least £25,000 new, and not many of us have that kind of money sitting around in our bank accounts.
Without finance, the UK’s £100bn-a-year auto industry, covering the manufacturers themselves, the suppliers and the network of dealers, will grind to a complete halt.
It might well not stop there. Even fewer of us buy a house with cash than a new car, and yet mortgage financing, which is almost as riddled with commissions and deals as car finance, could easily be impacted by the same ruling. Insurance is hardly any more straightforward, and yet without cover many trades will find it impossible to continue, since the potential liabilities will be too terrifying. The list goes on and on.
It would be easy to blame the lawyers who are warning their clients to pull financing deals from the market. Perhaps they are overreacting, but they are just doing their job. If a deal could end up costing you a couple of billion in compensation payments, you would, to put it mildly, expect your legal team to advise treading carefully.
In reality, the Financial Conduct Authority, the ultimate regulator for the sector, the Bank of England, and indeed the Government have created a complete mess. Vagueness in the rules allowed the Court of Appeal to step in, upending years of established practice in nanoseconds.
The risk now is that the UK economy could face a genuine credit crunch, with finance completely drying up. Very soon, whole swathes of the economy may come to a juddering halt, plunging the UK into a deep recession.