The out of court settlement was reached after Kernahan of Witney took legal action against the carmaker for failing to make certain warranty and sales bonus payments.

Martin Kernahan, managing director of the Oxon-based company welcomed the settlement but claimed Kia Motors UK, under its former management, had failed to act reputably.

“The settlement that has been mutually agreed is fair and equitable.

“It is unusual for a dealer to take legal action against a manufacturer but in my view the previous senior management of Kia was behaving in an unacceptable and disreputable manner,” Kernahan said.

He added that he believed KMUK, under its new regime, had now cleaned up its act.

“We conduct our business in a straightforward and honest manner and we expect others to do the same. I believe the new management team at KMUK has introduced a new and much more appropriate level of professionalism to the business.”

Kernahan of Witney began its action against KMUK in the first quarter of 2006.

Paul Williams, the former managing director of the brand's UK operation, left his position in July last year and Paul Philpott, formerly commercial director of Toyota GB, stepped into the role in February 2007.

A spokesman for Kia said: “We are pleased this disagreement has been resolved and it remains our intention to work with all our dealers in a spirit of partnership.”

Long established as an MG Rover dealer, Kernahan of Witney took on Kia in 2004 but terminated the sales franchise in September 2005.

Kernahan said the business stayed on as an authorised repairer for Kia until April 2006, when it became “completely divorced” from the brand.

Kia aims to fill the open point.