The average loan for a car is €10,000-€15,000 and can take up to five years to repay, according to car finance providers.

The table opposite shows some of the rates available on motor loans, plus indicative rates for hire purchase deals available on garage forecourts.

There is another way to borrow to pay for a car: by using your home as security to avail of mortgage rates as low as 3.3 per cent.

On some equity release products such as First Active's Utopia loan, it is possible to split the term so that borrowings for short-term assets such as cars can be repaid over five years while the home loan is repaid over 20-30 years. However, in practice equity release customers frequently let all of their borrowings fester over the longer term.

"I would say that a very small proportion of people would use equity release to pay for a car," says Mr David Slattery, marketing manager at Bank of Ireland's cards and loans business.

"It is more appropriate for doing up the house, adding value to the house. A car is a depreciating asset and the repayment term should match the life of the asset."

Paying a car off over the lifetime of a mortgage makes little sense when people will need to replace their car within a few years, says Mr Dave Matthews from the Irish League of Credit Unions (ILCU).

"Mostly we would recommend that credit unions wouldn't go above five years for a new car and a bit less than that for an old car."

According to Mr Slattery from Bank of Ireland, people who select a five-year repayment term often end up clearing off their debt within two to three years.

Unlike hire purchase deals or other fixed-rate products, variable rate loans allow consumers to do this without penalty, he points out. Some 80 per cent of the bank's motor loan customers opt for variable rates.

Credit unions are known for their flexibility when it comes to paying off loans and interest is only charged on the outstanding balance. Interest rates are capped at a maximum of 1 per cent per month, which works out as an annual percentage rate (APR) of over 12 per cent.

However, many credit unions offer reduced rates that can be as low as 7 per cent, while some give interest rebates at the end of the year. "The average is 8.5 or 9 per cent," Mr Matthews says.

Other lenders, such as Permanent TSB, argue that fixed-rate products are timely because economists are predicting a rise in interest rates later this year.

"People are locking in at the bottom now," says Mr Chris Hanlon, managing director of Permanent TSB Finance.