The Office of Fair Trading (OFT) has revealed that a fifth of consumers purchasing second-hand cars from dealers face a problem.
Of these, almost seven in 10 buyers experienced problems with the vehicle within a month of its purchase, while nearly 30% of buyers said the dealer, who is obliged to fix the issue, did not do so when approached.
This suggests that used cars buyers could approach car insurance firms as they spend £425 each fixing unresolved faults, accounting for a total of around £85 million annually.
The report also showed that consumers could be paying extra £580 million a year because of illegal "clocking", which involves adjusting the vehicle to display lower mileage.
More than a quarter of buyers rated used car dealers as very unhelpful and 11% said they were fairly unhelpful.
The OFT said that some dealers pose themselves as private sellers to avoid legal obligations to consumers and often sell unsafe or clocked cars, which accounts for more than £40 million of annual second-hand car sales.
According to the OFT survey, nearly one in 10 dealers depend on illegal disclaimers about the car's history and condition.
© Press Association 2010