The Yes Car Credit business is to be closed with the loss of about 820 jobs, its owner Provident Financial has said.
Yes car credit has faced harsh criticism
Provident Financial said Yes Car Credit was "no longer viable" after talks with possible buyers of the company collapsed last week.
The firm said it would continue to collect £240m of outstanding car loans.
"If you have bought a car from Yes with a loan then nothing changes, you keep the vehicle and make repayments," a Provident Financial spokeswoman said.
Provident said Yes Car Credit's customers who have questions about their loan agreements or their vehicles could call a service helpline on 0870 2400 596. Yes Car Credit has 60,000 customers, Provident added.
The firm stressed that customers would still be covered if their vehicle broke down, provided it was under warranty.
Provident said tough competition and changes to the regulatory environment had changed trading conditions, and Yes had ceased to be profitable in 2004.
Yes, which is based in Horsham in West Sussex, is expected to make a pre-tax trading loss of £24m this year.
However, Provident added that the write-off of goodwill, closure costs and asset write downs meant the Yes unit was set to record a pre-tax loss of about £141m.
Provident Financial said its profits for 2005 - excluding Yes - are expected to be about 5% below market forecasts.
The Yes Car Credit division has been struggling for some time. It has seen profitability vanish and its sales practices have come under fire.
In March, the BBC's Whistleblower programme exposed failings at the business.
The programme claimed that because proper safety inspections were not carried out, potentially dangerous cars were sold to customers.
The Whistleblower programme showed sales staff openly criticising Yes Car Credit's vehicles and even advising an undercover reporter from the BBC not to bother buying one.