The UK Supreme Court’s ruling on car loan sales practices may save car finance companies billions in compensation payouts, triggering a wave of consolidation in the sector. Lower costs and increased clarity could lead to increased dealmaking in the coming months.

London-based private equity firm Cabot Square Capital is reportedly looking to sell Blue Motor Finance, which recorded a loss of 8.5 million pounds in 2023. Similarly, Startline, owned by The Baupost Group, could also come to market soon, with reported interest receivable of 100.3 million pounds in 2023.

The financial watchdog in the UK is working on a compensation scheme for car loans with undisclosed commission arrangements. Despite uncertainties, the car finance market remains strong, with around 80% of new cars being sold with motor finance. New business in the market rose 6% in value in the first six months of 2025.

Potential bidders for car finance companies could include larger banks, private equity, and private credit funds. Analysts suggest that larger motor finance-exposed firms like Aldermore and Close Brothers could be targets for M&A activity following the court ruling. Close Brothers’ shares have risen around 25% since the ruling.

The ruling by the UK Supreme Court may pave the way for future M&A activity in the motor finance space, but significant movement is not expected until 2026. Despite the uncertainty surrounding compensation costs, there is likely to be interest from potential buyers in a growing market that plays a crucial role in the UK automotive industry.

Read more at Yahoo Finance: Analysis-UK motor finance ruling could fuel M&A