The UK has seen an increase in car finance fraud as a result of the recession, it has been revealed.

Figures released by automotive information specialist HPI show that almost 40 per cent of all motor fraud cases in the third quarter of 2009 were the result of people selling cars that had outstanding finance against them and that they therefore did not own.

The group added that if car buyers purchase a vehicle on outstanding finance, they stand to lose both the car and the money they paid for it.

Nicola Johnson, consumer services manager at the organisation, commented that a seller or purchaser receipt will not offer legal protection for a buyer if the car later turns out to be on outstanding finance.

"The hard truth is that finance companies can and will take back their asset if a loan secured against it is defaulted upon," she said.

Figures released by the Finance and Leasing Association earlier this week show that the number of new cars bought by consumers using dealer finance in December 2009 grew by a record rate of 91 per cent compared to the same month in 2008.

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