Consumers who exchange a car that is still being paid for on credit for a newer model - and pay the difference in cash - could be left owing the outstanding balance on the credit agreement if the motor dealer goes out of business.
Several customers of the collapsed Leicestershire car dealer Swithland Motors may be liable for outstanding credit agreements, which the dealer had not finished paying off by last November when it went into receivership.
Customers who entered into new replacement-credit and hire-purchase agreements are not affected, because the finance companies on the new agreements become liable for the old debt.
Trading standards officers warn it is unwise to pay cash for a car if the one used in part exchange is still subject to a credit agreement.
Swithland ceased trading after failing in its attempt to float as a public company.
Swithland has a long history, dating back to 1977, of legal convictions - including clocking and false description - as well as breaches of civil law. However, the Office of Fair Trading last year refused requests from trading standards officers at Leicestershire County Council to revoke the company's credit licence.
Two years ago, the Independent on Sunday revealed that Swithland had persuaded some customers to sign two sets of credit agreements in breach of the Consumer Credit Act, in case customers were rejected by the company's usual credit issuer. In one case, the company had mistakenly activated both sets of direct debits.
Swithland's directors, brothers John and Richard Hayes, have been arrested but are on police bail without charge.