CHEAP finance deals on new cars could be scrapped as lenders struggle with falling used car prices.
Budget monthly payments may no longer be offered and contracts lengthened as fears grow that too many cars are being bought on finance.
The prediction comes as the Bank of England warned the sector is “facing headwinds” from a number of sources and needs to act fast to avoid taking a hit.
Around 90 per cent of new cars have been sold on finance in the last year – mainly on personal contract purchase (PCP) deals.
These deals offer affordable monthly payments over three to four years with a large settlement figure at the end to own the car.
The payments are based on the Guaranteed Minimum Future Value (GMFV) – a predicted value of the vehicle at the end of the contract.
But many drivers are upgrading PCP deals early to get into a newer model – just like you would “flip” a house or trade-in a mobile phone.
And it’s leaving dealers and loan providers facing huge losses as cars being returned have depreciated faster than expected and can’t match their GMFV.
And experts have warned used cars are losing value quicker than ever before.
A car less than two and a half years old is worth just 57.6 per cent of its original value – down from 61.1 per cent in 2014.
For used car buyers it means you can score a bargain on a nearly new motor with huge stocks of returned finance models on dealer forecourts.