The deal, which should be completed by October, is viewed in banking circles as a bargain, with Santander taking advantage of the economic downturn.
Santander plans to merge A&L with the rebranded Abbey, and the combined network will pose another challenge to motor retail point-of-sale finance.
The Spanish bank has ambitions to strengthen its position in the UK and will use its new larger high-street presence to push loans for cars and other items.
A&L is also a mortgage lender, and some analysts sees Santander’s move as a sign that the leading finance provider believes the property value slump could be relatively short-lived.
Most analysts believe there will be an upturn in 2010.