Free VED can only be used only on one car!
If you have a Motabilty car plus a private car, Motability automatically use the free VED on your Motability car. However what you can do is, if, your Motability car has the lowest cost VED, you can tell Motability you want to pay the VED and then apply the free VED to your wifes car if it has a higher rate 🙂