Unpaid finance levels in used car market reaches all-time high

 

The number of used cars on offer with unpaid loans still outstanding against them has reached an all-time high, according to car history expert Cartell.ie.

The website is reporting that out of all cars offered for sale second hand, 18.3 per cent have not yet had their initial loans repaid. That number, based on a sample of 5,906 cars checked during the course of 2019, is up from the 16.6 per cent recorded at the end of 2018. Cartell says that it is the highest level ever recorded in Ireland.

While there can be many entirely benign reasons why a car might be offered for sale with finance outstanding (usually the seller intends to pay off the remaining amount with the proceeds from the sale) there are some shadier practices out there.

A car sold with finance outstanding is still, technically, the property of the bank or finance house which issued the loan, and if the final amount is not paid off, the car can be seized with no recourse for the person who bought it. The levels are especially acute for two year old cars, of which 40 per cent still had finance remaining to be paid. One year old cars were not far behind in such stakes — 39 per cent still have unpaid loans, while the figure for three year old cars is 36 per cent.

Older cars, which buyers might cheerfully assume would have had their loans paid for by now, are not as safe a bet as one might think. 22 per cent of all four year old vehicles offered for sale in 2019 had outstanding finance against them and the rates of finance are going up for older cars too: four year old to ten year old cars all showed respective increases over the corresponding levels recorded last year.

John Byrne, general counsel for Cartell.ie, said: “Not only are finance levels the highest we have ever recorded but the increases can be seen right across the board. We are seeing gains in virtually every year-segment indicating that more and more people are financing their second-hand car purchase.

“There could be many reasons for this including new entrants in the finance market, better availability of finance, or, in the case of PCP, buyers may be increasingly financing the balloon payment that falls due at the end of the initial PCP term.

“What’s really concerning is that finance levels are up across nearly all the years and the headline figure of 18 per cent overall is particularly concerning. Buyers are strongly advised to be cautious in the market as you cannot take good title in the asset until the final payment has been paid to the financial institution. This means you may be buying a huge problem.”