At least 10,000 new and used vehicles are bought each working day through some form of finance deal, rising to 20,000 a day during August when the new registration letter is issued.
Figures from HPI Autodata show that 6,100 cars, or 13 per cent of the 47,500 vehicles checked on behalf of potential buyers this year, are being sold with finance deals still outstanding on them. Most were priced between pounds 2,000 and pounds 4,000.
In many cases the cars being bought have previously been subject to a hire purchase deal, where technically a trader sells the car to a finance company which leases it back to the customer. So the seller does not legally own the car.
Even buying a vehicle from a reputable dealer can land someone with an unpleasant surprise as Graham Hudson, manager of a stove enamelling firm at High Wycombe, Buckinghamshire, discovered this week.
Mr Hudson said: 'I saw a J-registered Ford Escort on sale at a local car showroom, so I took my wife Theresa to have a look at it. We went back on Monday and decided to buy it.
'I handed over a cheque for pounds 5,795 which was cashed on Tuesday. As I was driving it to work I noticed that the registration number etched on all the windows was different from that of the car itself, so I carried out some checks with HPI.'
Although the checks showed the wrongly etched windows were a mistake, they also revealed that a loan was still outstanding on the car.
In this case the car dealer will be sorting the matter out with the previous owner and Mr Hudson will not have his Escort repossessed.
He said: 'This has been an extremely worrying time. I thought that maybe I had lost nearly pounds 6,000 simply because I did not try to find out if there was still money owed on the car.'
Duncan Callow, head of the litigation unit at the Legal Protection Group, a subsidiary of the Sun Alliance insurance company, said: 'When a second-hand car is bought while still the subject of an HP agreement 'agents' for the finance company often try to repossess it. They have no right to do that.
'Under the Hire Purchase Act if a private purchaser buys a car in good faith without being told of any undischarged finance he has good title to it.'
Nicky Webster, marketing manager at HPI Autodata, sounded a note of warning.
'Although the law is clear as far as HP is concerned, lease agreements are different,' he said.
'Because they were never mentioned under the act, 'good faith' may not be a defence.'
Anyone considering buying a second-hand car from a dealer should also be aware of the difference between finance agreements, added Mr Callow.
With a traditional loan from a bank, building society or finance company the customer is effectively buying with cash.
This implies that the car being bought must be of 'merchantable quality' to comply with the Sale of Goods Act. But if the loan is made by a company connected to the trader the buyer has additional rights against the finance company under the Consumer Credit Act.
Mr Callow explained: 'If the dealer has seriously misrepresented the condition of the car both the purchase and the finance arrangement may be null and void.'
If the loan agreement followed a conversation with the lender or the car dealer, a cooling-off period in which the deal can be cancelled may be possible, but only if the finance agreement was signed away from the car showroom - which is unlikely.
HPI Autodata can be contacted on 0722 422422
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