The UK motor industry has spent more than £1.4bn financing demonstrator cars over the past 12 months. Many of these will have been short-term preregistered cars, on the books to boost manufacturer market share or achieve dealer sales targets.

The continuing growth in the number of demonstrators makes a mockery of carmakers' claims they do not preregister cars. Latest Finance and Leasing Association (FLA) figures reveal 20% more cars in the demonstrator category were registered in the past 12 months, as against the previous 12-month period.

More than 106,000 units, or just under 10%, of the new cars financed in a year are demonstrators. The total represents almost 5% of the annual new car market, since the remaining cars are bought outright or not financed through FLA members.

There are some signs the deluge of demonstrator cars onto the market is slowing down. Around 20% fewer demonstrators were registered in June against the corresponding month last year, and the growth rate has slowed considerably. Three months ago the rate of preregistration was doubling. Under the new Government legislation, carmakers and dealers will have to declare their preregistration figures.

The effect of the 'Rip-Off Britain' campaign is reflected in the FLA's figures for June, and for the past 12 months. New car finance is down by 7%, year-on-year with used car finance also down by 9%.

Motor finance, once the fastest growing sector of the industry, is facing a tough time. In the past 12 months it has lost around £1.5bn worth of business and a clamp down on preregistering will hit it harder.

Industry chiefs will be watching the used car market carefully. Finance penetration in used cars is higher than in new and it has proved more resilient in the past. However, June saw the figures slump with 19% less used car business written and more than £130m taken out of the market in four weeks. Dealers reported slow sales and falling residual values which effectively means customers have to borrow less.