Mercedes has fitted spy tracker devices to thousands of high-performance cars.
The secret sensors have been fitted to new and used models, enabling the manufacturer to view each car’s exact location.
It claims the devices are only activated in “exceptional circumstances” where customers default on finance agreements and says they have not been used to permanently track customers or access real-time data.
But it admits it shared the data with third-party bailiffs and recovery firms.
The company said: “When a customer chooses to finance the purchase of their car this way, they sign a contract and agree to the location sensors in the car being activated in the event that they default or breach their agreement.
“This clause in the finance contract is in bold print, just above the customer’s signature.
“Locating the car is part of the repossession process and is not permanently tracking customers.
“It is only activated in exceptional circumstances where the customer has breached their finance agreement and repeatedly failed to reply to requests to contact us.”
Mercedes’ rivals, including BMW and Jaguar Land Rover, say they do not carry out similar tracking.
British politician David Davis told the Sun newspaper: "This is not the first time big business has behaved like Big Brother – but it's rare to be quite as deceitful as this.
“I have to question whether it is even legal to pass on information to other people such as bailiffs.
“I would think the relevant minister ought to look very closely at the legality of this procedure.”
In the UK, an estimated 80 per cent of Mercedes’ vehicles are sold on finance plans.
It is illegal under EU data protection laws to track a vehicle without the driver’s knowledge, but cars bought on finance agreements include a clause about location sensors which customers must sign up to.