MotoNovo, one of the UK’s largest car finance providers, has been put up for sale after regulators unveiled a £9.1 billion redress scheme linked to the car finance mis-selling scandal. The move signals a major shake-up in the UK auto finance market, with its parent company preparing to exit the sector.
South African banking group FirstRand, which owns Aldermore and its subsidiary MotoNovo, confirmed it is working with regulators and the Aldermore board to ensure a smooth ownership transition. The bank directly linked its decision to the Financial Conduct Authority’s (FCA) newly finalised compensation scheme, describing it as fundamentally flawed.
FirstRand has sharply increased its financial provisions for the scheme, raising the figure from an initial £510 million to around £750 million. This significantly exceeds the £275 million profit generated by its UK motor finance division over the past decade, highlighting the financial pressure imposed by the ruling.
The redress scheme has triggered strong criticism from industry leaders. Shanika Amarasekara, chief executive of the Finance and Leasing Association, warned that compensation must be targeted only at customers who suffered genuine losses. She argued that an overly broad scheme risks rewarding claims management firms rather than affected consumers.
Despite the backlash, the FCA maintains that the scheme offers the most efficient and fair resolution. According to the regulator, handling complaints individually could cost the industry more than £6 billion extra compared with a structured redress approach.
MotoNovo is estimated to account for roughly 10% of the UK car finance market, making its potential sale a significant development. Other major lenders are also feeling the impact, with Lloyds setting aside approximately £2 billion and Santander allocating close to £500 million to cover potential claims.
The unfolding situation underscores growing regulatory pressure on the car finance sector, with further consolidation and strategic exits likely as firms reassess their long-term position in the UK market.
