MotoNovo Finance has increased the amount set aside on its balance sheet for potential motor finance redress scheme to £220.3 million [1], as historic commission costs continue to weigh on the lender while its parent group considers a sale.

Accounts for the year to 30 June 2026 show MotoNovo recognised a £153.2 million charge relating to historic motor finance commissions, more than double the £60.6 million reported in the previous year.

Of the latest charge, £147.8 million related to potential customer redress and £5.4 million to associated operational costs, including legal fees, complaint handling and preparations for the FCA's Motor Finance Consumer Redress Scheme.

MotoNovo reported a £151.6 million loss for the financial year, compared with a £24.6 million loss a year earlier.

However, its underlying lending business continued to grow. Net loans increased by 10% to £4.5 billion, while new lending rose 20% to £2.4 billion.

The results come as South African owner FirstRand progresses plans to sell Aldermore Group, which includes both Aldermore Bank and MotoNovo Finance.

How much has MotoNovo set aside for car finance compensation?

At 30 June 2026, Aldermore Group had a total balance-sheet provision of £231.8 million for potential customer redress and associated costs arising from the FCA's review of historic car finance commission arrangements [2].

Of that amount, £220.3 million was recognised on the balance sheet of MotoNovo Finance Limited. The remaining £11.5 million was recognised by Aldermore Bank.

A year earlier, the group-wide provision stood at £73.1 million.

Aldermore said the latest provision represents management's best estimate of the expenditure required to settle obligations arising from the FCA's Motor Finance Consumer Redress Scheme [3], including compensatory interest and the incremental costs of administering the scheme.

It is important to distinguish the balance-sheet provision from the charge recorded during the year.

MotoNovo's latest accounts recorded a £153.2 million charge, according to reporting on the results, while the £220.3 million figure represents the provision held on MotoNovo's balance sheet at the end of June.

Neither figure represents compensation that has already been paid to customers.

Motor finance compensation costs push MotoNovo further into loss

The increased cost of historic motor finance claims had a significant effect on MotoNovo's annual results.

The lender recorded a £151.6 million loss for the year to June 2026, compared with a £24.6 million loss in the previous year.

The deterioration came despite growth in its lending book.

MotoNovo's net loans increased by 10% to £4.5 billion, while new lending increased by a fifth to £2.4 billion.

Operating income, however, fell 9% to £155.5 million as its net interest margin declined from 4.29% to 3.55%.

The figures illustrate the different pressures facing the business. MotoNovo continues to write substantial volumes of new motor finance while simultaneously preparing for the potential cost of resolving historic commission arrangements.

Aldermore's wider motor finance charge rises

MotoNovo forms part of Aldermore Group alongside Aldermore Bank.

At group level, Aldermore reported a £164.8 million historical motor finance charge during the year, compared with £60.6 million in 2025.

This comprised £159.3 million relating to the historical mis-sold car finance provision and £5.5 million of related costs incurred during the year.

The higher provision contributed to a sharp decline in Aldermore Group's statutory profit before tax, which fell from £193.5 million in 2025 to £51.2 million in 2026.

Aldermore said its statutory results were significantly affected by the increase in its motor finance provision in relation to the wider car finance scandal, as well as restructuring charges and costs associated with the potential sale of the group.

Its underlying profit before tax was £238.9 million.

Why has the provision changed?

Aldermore said its latest estimate reflects the FCA car finance final rules for the Motor Finance Consumer Redress Scheme, published in March 2026.

The £231.8 million group provision is based on a single scenario aligned, where appropriate, with the FCA's final policy statement.

That differs from the approach used a year earlier, when uncertainty about the eventual shape of the scheme led the group to use probability-weighted scenarios.

However, uncertainty has not disappeared.

Aldermore's annual report acknowledges that significant uncertainty remains around the provision, including legal developments affecting the redress scheme.

The provision should therefore be viewed as management's current accounting estimate rather than a final compensation bill.

What does the £220m provision mean for MotoNovo Finance claims?

The size of MotoNovo compensation provision does not mean that every customer who financed a vehicle through the lender will receive compensation.

The FCA's scheme covers certain regulated motor finance agreements entered into between 6 April 2007 and 1 November 2024, subject to its eligibility requirements.

The scheme is designed to provide redress where qualifying historic commission arrangements resulted in unfairness and loss.

These can include certain discretionary commission arrangements, high commission and undisclosed ties between lenders and brokers.

Whether an individual MotoNovo Finance claim qualifies therefore depends on the circumstances of the agreement rather than simply the identity of the lender.

Likewise, the £220.3 million provision cannot be divided by MotoNovo's customers to estimate an individual payment.

It incorporates assumptions about potential redress, compensatory interest and the costs involved in administering the scheme.

MotoNovo's parent company remains up for sale

The increased provision comes at an important time for MotoNovo's ownership.

FirstRand has classified Aldermore Group as a discontinued operation and a disposal group held for sale as the South African financial services group works towards an orderly exit from its UK consumer finance business [4].

Aldermore Group consists of Aldermore Bank and MotoNovo Finance.

The sale process has attracted reported interest from a number of banks and investment firms.

Nationwide and Investec have been linked with potential bids, while Lloyds, Warburg Pincus and a partnership between CVC and JC Flowers have also been reported among interested parties [5].

FirstRand previously said it expected non-binding offers by the end of September, followed by due diligence and final binding offers by the end of December.

The precise structure of any eventual transaction remains to be determined.

That means it should not currently be assumed that MotoNovo will necessarily be sold separately from Aldermore Bank or that any particular potential bidder will ultimately acquire the business.

Would a sale affect MotoNovo car finance claims?

A change in ownership would not by itself erase consumers' existing rights or determine whether individual agreements qualify for redress.

The eventual treatment of car finance mis-selling liabilities would depend on the structure and terms of any transaction, as well as the applicable regulatory and legal requirements.

For consumers, the more immediate issue remains the FCA redress process rather than who ultimately owns MotoNovo.

Consumers can make a complaint directly to their lender for free if they believe they may have been affected by historic motor finance commission arrangements.

They may also choose to use an FCA-regulated claims management company or a solicitor for professional support, although fees may apply.

What happens next?

MotoNovo's latest accounts provide a clearer picture of the potential financial impact of historic motor finance commissions on one of the UK's major specialist car finance providers.

Its £220.3 million balance-sheet provision is substantial, while the £153.2 million charge recorded in its latest accounts contributed to a much larger annual loss.

At the same time, new lending continued to grow, showing that the current MotoNovo business remains active while the lender deals with historic commission issues.

Two separate developments will now be important to watch: the legal proceedings affecting implementation of the FCA's redress scheme and FirstRand's ongoing sale process for Aldermore Group.

For consumers with potential MotoNovo Finance claims, however, neither the size of the provision nor the potential sale determines individual eligibility.

That will ultimately depend on the finance agreement and the rules governing the motor finance redress process.

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References:

1. MotoNovo Finance has increased the amount set aside on its balance sheet for potential motor finance redress scheme to £220.3 million - https://www.cityam.com/motonovo-hikes-motor-finance-provision-as-buyers-circle-aldermore/
2. At 30 June 2026, Aldermore Group had a total balance-sheet provision of £231.8 million for potential customer redress and associated costs arising from the FCA's review of historic car finance commission arrangements - https://www.lse.co.uk/rns/annual-financial-report-wmlhhf43t1y24yn.html
3. FCA's Motor Finance Consumer Redress Scheme - https://www.fca.org.uk/publications/policy-statements/ps26-3-motor-finance-consumer-redress-scheme
4. FirstRand has classified Aldermore Group as a discontinued operation and a disposal group held for sale as the South African financial services group works towards an orderly exit from its UK consumer finance business - https://businesstech.co.za/news/banking/874746/one-of-south-africas-most-valuable-banks-planning-a-major-exit/
5. Nationwide and Investec have been linked with potential bids, while Lloyds, Warburg Pincus and a partnership between CVC and JC Flowers have also been reported among interested parties - https://www.cityam.com/exclusive-nationwide-and-investec-set-to-bid-for-alternative-lender-aldermore/