40 per cent jump in the number of cars being sold with finance owing

The number of used cars for sale with finance still outstanding has jumped by 40 per cent since December.

According to research by car history experts Cartell.ie, last December seven per cent of all used cars on sale were still the subject of outstanding loans or finance. As of the end of June 2015, that figure now stands at 9.6 per cent.

There are clear signs of the increasing recourse to finance packages for car purchases too. One fifth of used cars first registered in 2012 still have finance owing, while of cars bought in 2013, 19 per cent still have not had their original loans paid off.

Even further back, the numbers remain significant. The rate for cars registred in 2010 is just over 10 per cent, and it’s 6.8 per cent for cars registered in 2008. It’s only when you go back as far as 2005 that the rate drops off significantly.

While there is nothing illegal about offering a car for sale when finance is still owed on it, it can have serious repercussions for the next owner. If the vendor doesn't act responsibly and use the proceeds of the sale to clear the debt, then the finance company can and will swoop in and have the car repossessed – regardless of whether it has been purchased in good faith or not.

John Byrne, Legal and Public Relations Manager, Cartell.ie, said that "finance levels are now rising fast since reaching a low of around per per cent in December 2014. This creates a treacherous terrain for a used car buyer as those who may have risked a purchase in the past without checking if a vehicle has outstanding finance stand a far higher risk of getting caught out in the current market."

It's also clear from Cartell's numbers that not only is finance being used for an increasing number of car purchases (especially in the form of Personal Contract Plans, or PCPs) but that the money is coming from the car makers themselves. According to Cartell, while Bank of Ireland and AIB still occupy the top two spots on the car finance league table (with 21 per cent and 18 per cent respectively) they are being caught rapidly by the in-house car company banks. BMW Financial Services currently holds 16 per cent of the total Irish vehicle finance market, while Volkswagen Bank has 14 per cent, and they're both gaining ground quickly, in many cases because they're still both more likely to approve a loan than a high street bank.

"The market dynamics have changed significantly in the last 5 years" said Byrne. "Banks such as BMW Financial Services and VW Bank – in-house banks which rose to prominence as a direct result of the negative impact of the recession on market liquidity – are now booming. These results may correlate with the increasing popularity of PCP in the marketplace."