Is the car market facing a mis-selling scandal?

"Britain's £40 billion car finance market could be heading towards a mis-selling scandal," warns The Times.

Concerns are rising over "the reliance on debt to buy vehicles". Leasing deals now account for almost 90 per cent of sales, propelling the sector to new records this year.

"So-called personal contract plans (PCPs)", which allow people to secure cars for monthly payments, see customers effectively pay for the depreciation in the value of their car and lease it for up to four years, at which point they either pay a lump sum to buy the vehicle outright or it goes back to the dealership for second-hand sale.

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But the Financial Conduct Authority warned it believes "some borrowers, particularly poorer customers, may be paying too much for credit".

It has launched a preliminary review expected to report back next year, which could lead to a wider study. It also said it would "intervene" if it found evidence of wrongdoing.

The Times adds that "the Car Finance Company, a provider of finance to those with poor credit histories, appears to be in financial trouble". Six directors have quit since the beginning of March and Companies House lists its accounts as "overdue", claims the paper.

In addition, last week "Pine Brook, The Car Finance Company's New York-based private equity fund owner, removed the company from its list of investments on its website".

There is no suggestion of any wrongdoing by the Car Finance Company.

Andrew Smith, a director at Compliancy Services, which advises dealers on financial regulations, said: "The culture of the business has to change and from the evidence I have seen there are some things going wrong.

"The majority of customers have no idea who their financing contract is with, even though the rules state the buyer has to know who they are dealing with, along with everyone else involved in the chain."

If dealerships are found to have facilitated "mis-sold" loans to customers, the companies behind them could be found to be liable for "millions of pounds" in compensation, adds the Times.