Car buyers opting to cash in on the property boom could be paying up to twice the market value for their new car, warns motor price guide and market commentator, WiseBuyer’s.

In 2003, homeowners borrowed £121 billion on remortgage loans according to the Council of Mortgage Lenders, with 45% of the equity released for the purpose of new home improvements, holidays and car purchases.

Adding the £13,000 price of an average family hatchback, like a Ford Focus or Vauxhall Astra, to a 25 year mortgage will cost an extra £85 a month based on today’s typical 6% APR variable rate according to WiseBuyer’s.

Yet, over the lifetime of the loan, assuming that the rate remains the same, the actual cost of the car nearly doubles to a staggering £25,422. If the interest rate rises to 8%, the vehicle will end up costing £30,444 – or 135% more than the original manufacturers recommended retail price.

'Record new and used car sales are being underpinned by a growing mountain of debt,' explains WiseBuyer’s analyst, Nic Barfield. 'Cheaper, short term finance options from dealers, manufacturers and banks are being too readily ignored as people look to cash in on the property boom.'

For the borrowers, the hook is short-term affordability, with long-term inflation reducing the true cost of the repayments. However, a car is a depreciating rather than appreciating asset.