Loans outstanding on 25% of 2008 cars

ALMOST ONE-QUARTER of cars offered for sale with a 2008 or 2007 registration have finance outstanding, according to a study by vehicle checking firm Cartell.ie.

Car finance differs from personal finance as, in many cases, the loan follows the asset, meaning the unsuspecting buyer of a car with outstanding finance may have the car repossessed.

Cartell.ie checked 5,906 Irish cars and found 26 per cent of cars registered in 2008 and 23 per cent registered in 2007 had loans attached. It is not clear how many were sold privately or otherwise.

While car finance terms differ, almost all mean the lender retains ownership and preclude a sale until the loan is repaid. The National Consumer Agency (NCA) said the issue highlights a lack of awareness about how car finance works.

A spokeswoman for the NCA said the standard position is the finance house buys the car from the dealer and hires it out to the new owner. “The consumer does not take ownership of the car until the last payment has been made.

“Someone selling a car on finance is breaching their agreement with the finance company. So if you buy a car that is still on finance, you simply don’t own it.”

A buyer then faces having the car repossessed, reaching a new arrangement with the lender or tracking down the seller to ask them to pay off the debt.

“Legally, a buyer cannot take full ownership of a car unless the person they are buying from has it, and you don’t get title until all loans are paid off,” said Alan Nolan, SIMI chief executive.

The absence of a document in Ireland showing who has legal ownership of a car contributes to the problem, he says. While reputable dealers will check for outstanding finance, people buying privately or from “the fringes” of the industry should always do their own, he warned.

Prospective buyers are advised to check the financial background of a car they are interested in with Hire Purchase Information or a vehicle checking company.

With most car finance running for between three and five years the percentage of cars offered for sale with loans declines in older vehicles.

Jeff Aherne, co-founder and director of Cartell.ie, notes one inconsistency with the trend: 2009.

“Only 15.6 per cent of vehicles from 2009 we checked were on finance.” One explanation for this is the recession made it more difficult for buyers to secure finance.