Private equity giant CVC Capital Partners is preparing to join the race to buy Aldermore [1] as the challenger bank's South African owner looks to exit the UK amid concerns over the cost of the car finance scandal.

CVC is expected to submit an offer for Aldermore ahead of a September deadline, according to Sky News. Lloyds Banking Group is also expected to participate in the auction, while Metro Bank, which had previously explored a potential bid, is now thought unlikely to make an offer.

The sale has attracted particular attention because Aldermore's parent company, FirstRand, has estimated that it could face around £750 million in costs under the Financial Conduct Authority's Motor Finance Compensation Scheme [2].

That potential liability has made historic car finance claims an important consideration for prospective buyers.

CVC Prepares to Enter Aldermore Auction

CVC, one of Europe's largest private equity groups, has reportedly been preparing a possible offer for several months.

The firm has investments across a wide range of industries and owns stakes in businesses including the RAC.

It is expected to compete against other financial investors and banks when offers for Aldermore are submitted next month. No final buyer has been selected and CVC has declined to comment on the reports.

FirstRand acquired Aldermore in 2017 for £1.1 billion [3].

The South African banking group announced earlier this year that it intended to sell the business after reassessing its appetite for UK consumer finance risk following the introduction of the FCA's compensation scheme.

MotoNovo Could Be Sold Separately

One of the most significant aspects of the auction is the future of MotoNovo Finance, Aldermore's motor finance business.

Bankers advising FirstRand are expected to allow prospective buyers to make separate offers for Aldermore's banking operations and MotoNovo rather than requiring them to acquire the entire group.

That could potentially separate Aldermore's savings, mortgage and business finance operations from the part of the group most directly exposed to historic motor finance complaints.

MotoNovo has been a significant participant in the UK vehicle finance market.

For prospective buyers, its existing loan book and future lending business therefore need to be considered alongside potential liabilities arising from historic car finance mis-selling.

FirstRand Has Set Aside £750m

The scale of that potential exposure has already had a significant financial impact on Aldermore's owner.

FirstRand has estimated that it could face approximately £750 million in payouts under the FCA's redress programme. The provision was increased substantially earlier this year after the regulator published the final details of its Motor Finance Compensation Scheme.

FirstRand subsequently said owning a UK consumer finance business no longer fitted its risk appetite and announced plans for an orderly sale of Aldermore.

The decision represented one of the clearest examples of the wider car finance scandal influencing a major lender's corporate strategy.

However, the £750 million figure is a provision for anticipated liabilities rather than an indication that this amount has already been paid to customers.

Buyers Could Seek Protection Against Compensation Liabilities

The unresolved compensation exposure could also influence how a takeover is structured.

According to Sky News, a buyer of Aldermore is likely to seek an indemnity against future compensation liabilities [4].

An indemnity could determine which party ultimately bears specified historic costs after ownership changes.

This is potentially important because selling a lender does not automatically make existing consumer complaints disappear.

The FCA scheme concerns eligible motor finance agreements entered into between 6 April 2007 and 1 November 2024. Around 12.1 million agreements across the industry could qualify for compensation, with the regulator estimating an average payment of around £829 for eligible agreements [5].

The eventual treatment of Aldermore and MotoNovo's historic liabilities will therefore be an important part of any transaction.

What Does an Aldermore Sale Mean for MotoNovo Customers?

For existing customers, reports of a possible sale do not mean that their finance agreements have been cancelled or that they need to take immediate action.

A corporate ownership change is separate from the contractual relationship governing an existing finance agreement.

The same principle applies to consumers who have already made a car finance claim concerning a historic agreement.

Aldermore currently states that existing motor finance commission complaints remain open and customers who have already complained do not need to submit their complaint again. Consumers can also still make a new complaint about commission arrangements affecting an agreement.

Any future purchaser and FirstRand would need to determine how relevant liabilities are allocated as part of the transaction, subject to applicable regulatory requirements.

What About PCP Claims?

Some historic agreements associated with MotoNovo may involve Personal Contract Purchase finance.

Consumers considering PCP claims should distinguish between the proposed sale of Aldermore and whether their individual agreement meets the FCA car finance scheme criteria.

A change in ownership does not itself establish that someone has a valid PCP claim, nor does it automatically remove an existing complaint.

Eligibility for PCP finance claims or a PCP refund and other motor finance complaints continues to depend on the circumstances of the agreement and the FCA's rules.

Similarly, the fact that FirstRand has made a substantial financial provision does not mean every former MotoNovo customer experienced mis-sold car finance or will receive compensation.

Legal Challenges Continue to Create Uncertainty

The Aldermore auction is taking place while the wider compensation scheme remains subject to legal challenges.

CA Auto Finance, Mercedes-Benz Financial Services, Volkswagen Financial Services and Consumer Voice are challenging the lawfulness of the scheme before the Upper Tribunal [6]. Parts of the scheme have consequently been suspended [7].

While that suspension remains in place, lenders do not currently have to calculate or pay compensation under the affected provisions. They must continue complying with parts of the scheme that remain in force.

Aldermore also tells customers that it is not currently required to calculate or pay redress while the suspension continues. Existing complaints remain open.

That uncertainty makes the ultimate cost of car finance compensation particularly relevant to any business considering acquiring Aldermore or MotoNovo.

September Could Bring Greater Clarity

FirstRand's advisers are expected to receive takeover proposals in September, although there is no guarantee that CVC or any other prospective bidder will ultimately complete a deal.

Bank of America and Rand Merchant Bank are advising FirstRand on the sale.

The auction will nevertheless be closely watched because it demonstrates how the consequences of historic motor finance practices are extending beyond individual car finance refund claims.

For FirstRand, potential compensation costs helped trigger a reassessment of its UK strategy. For prospective buyers, those historic liabilities are now an important consideration in determining what Aldermore and MotoNovo are worth and how any acquisition should be structured.

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References:

1. Private equity giant CVC Capital Partners is preparing to join the race to buy Aldermore - https://news.sky.com/story/aldermore-battle-heats-up-as-private-equity-giant-cvc-motors-into-auction-13574959
2. Aldermore's parent company, FirstRand, has estimated that it could face around £750 million in costs under the Financial Conduct Authority's Motor Finance Compensation Scheme - https://www.reuters.com/sustainability/boards-policy-regulation/south-africas-firstrand-exit-uk-unit-after-car-loan-provisions-hit-993-million-2026-04-07/
3. FirstRand acquired Aldermore in 2017 for £1.1 billion - https://www.firstrand.co.za/media/1031/2017/Media_release.pdf
4. According to Sky News, a buyer of Aldermore is likely to seek an indemnity against future compensation liabilities - https://news.sky.com/story/aldermore-battle-heats-up-as-private-equity-giant-cvc-motors-into-auction-13574959
5. the regulator estimating an average payment of around £829 for eligible agreements - https://www.fca.org.uk/publication/policy/ps26-3.pdf
6. CA Auto Finance, Mercedes-Benz Financial Services, Volkswagen Financial Services and Consumer Voice are challenging the lawfulness of the scheme before the Upper Tribunal - https://consumervoice.uk/cars/fca-car-finance-compensation-challenge/
7. Parts of the scheme have consequently been suspended - https://www.fca.org.uk/news/statements/motor-finance-scheme-partially-suspended