Motorists locked into finance deals on new cars could be leaving themselves open to huge bills if the car is written off or stolen before the end of the agreed loan period, according to UK motoring service provider MotorEasy.

Personal contract purchase (PCP) deals are now hugely popular with as much as 80% of new car ownership now financed in this way. These deals allow motorists to have a new car for a period of usually 3-5 years, in return for monthly payments. At the end of the term they have the option to pay the remainder and own the car or simply to hand it back.

At the same time vehicle write off rates are rising due to accidents and theft and this can cause a serious issue for PCP drivers.  If the vehicle is written off or stolen before the end of the term the insurance companies typically only pays the market value of the car at that point. That is often significantly less than the finance settlement figure at the same point, leaving the motorist with a financial shortfall and a hefty bill to pay off the finance.

To combat this issue, motorists should take out gap insurance. However, it seems that many are not and are being left financially exposed.