New data from StepChange Debt Charity reveals a marked increase in the proportion of clients contacting the charity for debt advice with car finance debt.   

Between January 2020 and March 2023, the proportion of clients accessing debt advice who have a car finance debt has risen by 14.8%. In the same period, the average balance of a client’s car finance debt has increased by more than 20%, from £8,077 to £9,705.

The charity’s research also found that clients with car finance debt tend to be more active users of other types of credit. The average client without a car finance debt has 5.9 unsecured debts, compared to 6.8 unsecured debts totalling over £4,000 more for those with a car finance debt, exclusive of their car finance debt itself.

Clients with a car finance debt were almost twice as likely to have a mortgage and those nearing the end of a fixed rate deal could find themselves paying more than £200 more each month for their mortgage as a result of rising interest rates.

The average car finance client had a monthly surplus of £142, which would be easily absorbed by increasing mortgage rates, increasing the risk of further problem debt.

Vanessa Northam, head of charity development at StepChange, said:

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“We know the cost of living crisis is having a significant impact on people’s ability to pay their debts and bills of all types, but this analysis shows just how vital it is that car finance providers ensure they are identifying and supporting their customers in this turbulent economic time. 

“Without the right support in place, customers could find themselves falling into financial difficulty. Over the coming months, we’ll be working closely with partner organisations to help raise awareness of this issue within the car finance sector, including through our new report and with a range of events and webinars.”

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