Now the problem is hurting many of the very dealers who have used small deposits and low monthly payments as a big sales incentive

CAP spokesman

Motorists can drive cars off the forecourt for a low deposit with full repayment over a number of years.

But customers are finding after two or three years that the car's value is lower than the repayments owed on the vehicle.

Keys returned

It claims many customers are now simply handing the cars back to dealers once half the capital cost of the vehicle has been paid off.

A CAP spokesman said: "Now the problem is hurting many of the very dealers who have used small deposits and low monthly payments as a big sales incentive."

Black Book senior editor, Daren Wiseman, said customers and those in the car trade were losing out.

While finance companies had to get rid of a car that had depreciated in value more than expected, customers were unhappy at having a deficit they could never catch up on.

"Now is the time for dealers and finance providers to think again about long-term low deposit finance," he said.

He argued that there was a strong case for shorter-term finance and bigger deposits to encourage repeat business and help prevent a future finance crisis.

Situation inevitable

But a spokesman for car-maker Vauxhall said: "This is due to falling new car prices and this is a natural consequence.

"People are in negative equity because new car prices are coming down because of consumer and government pressures."

He said consumers should be able to find different types of purchase deal if they wanted to.

A spokesman for the Society of Motor Manufacturers and Traders said this issue had been overblown.

"It surfaced and disappeared again very quickly.

"If prices suddenly drop, then these types of problems occur," he said.