The financial squeeze is starting to hurt car buyers.
AA Finance said motorists are borrowing 5% less for used car purchases this year as the cost-of-living crisis bites.
This time last year, the average loan would be enough to buy seven of the 10 most popular used cars but only four would be affordable after price rises were taken into account this year.
The average amount financed last year was £13,239, enough to buy a used Vauxhall Astra, Fiat 500, Vauxhall Corsa, Ford Fiesta, Ford Focus, Vauxhall Mokka, pictured, or Nissan Juke.
However, the average value of approved loans fell to £12,532 this year, putting a Mokka, Juke and Focus out of reach when price rises were included.
The average loan is now working out a month at £230 in 2023.
AA Car Finance director Mark Attwell said, ‘The cost-of-living crisis has hit motorists hard, and many finance companies have made it tougher to get loans to protect themselves.
‘For many drivers, popular used cars like the Ford Focus at their average cost can be out of reach without a significant deposit.”
But its not all gloom as he added if drivers shop around when buying second-hand cars they could save a lot of money.
He concluded by pointing out that buyers should also consider lengthening the loan term to keep repayments at the same level and give them more buying power.
The situation is particularly bad among used car dealers as new car businesses can often pull in financial assistance from a car maker’s credit supplier and the expansion of personal contract plans has grown so a new vehicle is never owned by leased and then handed back or traded against a new car at the end of an agreed term.
CAP HPI reports used car prices have fell 4.2% last month, the biggest ever October slip and it is worrying for dealers carrying large stocks and for finance firms which have underwritten valuations at the start of leasing agreements maybe three years ago.