Are cheap car loans the vehicle taking us to the next financial crash?

Borrowing to buy a vehicle using personal contract plans has become easy, fast and free from consequences. Or has it?

A decade ago it was sub-prime mortgages. Could it be sub-prime car loans this time? Cheap finance, the economic spectre of the age, has underpinned much of Britain’s growth over the past three years and there has been no bigger beneficiary of this debt-fuelled largesse than the car industry. But this four-wheeled binge, which reached a record £31.6bn in car loans last year, could have consequences if it veers off the road.

It takes just minutes to fill in the forms for a new kind of loan that cuts the cost of financing to levels that allow people on modest incomes to show up at the supermarket on a Saturday in the latest SUV. Applying takes no time at all, but the payback threatens to last a lot longer.

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