Volkswagen Faces a Double Bind: Sliding Used-Car Values and a Margin Forecast Cut to 1%

Volkswagen's financing arm is bracing for more than EUR 1 billion in special write-downs on leased vehicles in 2026 — the heaviest such charge in at least two decades, according to a Handelsblatt report. The disclosure lands as the group's core earnings power sits at its weakest in years, sharpening the question of whether cost cuts can outrun the erosion in vehicle values.

Volkswagen Financial Services intends to remarket roughly 600,000 end-of-contract vehicles next year, and four out of five of them are combustion-engine models. That mix explains why the deterioration in residual values hits so broadly. VWFS chief Anthony Bandmann said the depreciation on these cars is weighing disproportionately, with elevated fuel prices accelerating the shift toward electric vehicles and pushing down what used-benzine and diesel models fetch on the secondary market.

The pressure runs on two fronts at once for the financing division: sales volumes are softer, and the assets backing the leases are worth less than planned. How the remarketing effort performs has therefore become a live test of the division's earning power — a stabilization in combustion-car resale prices would ease the burden, while continued weakness would complicate the planned sell-down.

Cost Action Meets a Weak Earnings Base

Bandmann's response is a combination of savings measures and organizational restructuring, with consequences for headcount also anticipated. That counter-offensive targets the cost base, whereas the vehicle-value side depends on demand in the used-car market — two levers the company does not control equally.

The leasing problems arrive against an already strained profit picture. Over the first nine months of 2026, Volkswagen booked operating profit of EUR 71 million; before special items, the figure was EUR 8.8 billion. That gap illustrates how much one-off charges are distorting group earnings, with restructuring, weakness in China, competitive pressure and US tariffs all adding to the load.

Full-year revenue is forecast at around EUR 315 billion — a reminder that top-line scale alone says little about the group's health. What matters is how much operating profit Volkswagen can wring from that turnover.

Guidance Cut to a Maximum of 1%

The central metric for any reassessment is the operating return on sales, and Volkswagen has cut its 2026 forecast to no more than 1%, down from a previous expectation of 4% to 5.5%. That ceiling leaves precious little buffer.

Deutsche Bank Research trimmed its price target to EUR 100 from EUR 105 on Monday, while keeping its buy recommendation in place. The combination — retained confidence in a recovery, paired with a lower valuation horizon — puts the onus squarely on operational delivery rather than on the rating itself.

Adding to the scrutiny, Volkswagen said on 30 October that it would pause work on the forthcoming all-electric ID. Golf until the necessary investments can be reliably funded. The company explicitly described the step as a pause, and the financing question has become the concrete gauge of its room to maneuver.

A Quarter in the Red and a Legal Calendar

For the third quarter of 2026, Volkswagen reported a net loss after tax of EUR 5.8 billion. A weak earnings base could make it harder to secure funding for the required investments, in which case the ID. Golf pause would weigh on future planning for longer — the scenario in which project delay and financial constraint reinforce each other.

The next fixed date on the calendar, according to media reports, is the scheduled opening of a further diesel-scandal criminal trial in Braunschweig on 24 November. The date draws attention to legal risks, though no outcome can be inferred from it.

What would support the recovery case is tangible: steadier operating returns and a financing plan for the ID. Golf that holds up. A resumption of the project on a sound financial footing would inspire more confidence than a rapid restart under unchanged economic pressure. Until profitability improves, the planned sale of those 600,000 lease returns — and the prices they command — will remain the most visible barometer of Volkswagen Financial Services' earning power.