Don't let forecourt finance put your finances in reverse

M&S Money is warning motorists eagerly awaiting the new ‘62' plate car registrations on 1st September to check the rates and total borrowing costs before signing up to finance from their car dealer.

Around 330,000 new cars will be registered during September with motorists spending in the region of £4.95 billion on the latest new vehicles. More than two thirds (68%) of new cars bought by motorists in the last 12 months were purchased using finance sold in car dealerships, with the most popular type of finance being personal contract purchase plans (63%). However, a recent investigation by Which? revealed that a number of car dealerships were not making the required information, such as the APR and total cost payable, clear for buyers to make an informed comparison.

M&S Money is the only major lender to offer a genuine alternative to personal contract purchase finance offered by car dealerships. The M&S car buying plan allows the motorist to defer part of the loan to keep repayments manageable while still having the advantage of a fixed APR.

For those wanting an alternative to car dealer hire purchase, M&S Money also offers personal loans at 6.0% APR (representative) between £7,500 and £15,000 over 12 to 60 months, with flexible repayment terms and the option of making no payments for the first three months, subject to lending criteria.

John Hartnett, Head of Personal Loans at M&S Money, commented: "Buying a car is a major purchase, and it is important that motorists spend time looking for a good deal on their finance, as well as searching for their perfect vehicle.  By spending just a few minutes looking at some of the best finance options available, you will be armed with enough information to judge whether the deal the car salesman is offering you is worth entering into or not."

M&S Money Car Buying Plan - how it works:

With an M&S car buying plan customers can borrow between £2,500 and £25,000 and spread the loan over 12 to 60 months. With fixed monthly payments and flexible terms, there's an option to suit every budget. Customers can lower monthly payments by deferring part of their loan; this will increase the total interest payable. At the end of the term they can choose how to pay off the deferred part, they can:

Keep the car and carry on paying the fixed low monthly payments until the whole loan is paid off.

Keep the car and pay off the remainder of the loan with a lump sum.

Sell the car and use the money to pay off the remainder of the loan.

The amount that can be deferred depends upon the length of the term of the car buying plan:

Term - Deferred amount
12 months 60%
24 months 50%
36 months 40%
48 months 30%
60 months 30%

Representative example:

If borrowing £7,500 over 36 months at a representative 6.0% APR, the customer can make monthly payments on £4,500 and defer £3,000 to the end of the loan. If making 36 repayments at £151.18 and a final repayment of £3,000 the total amount payable will be £8,442.48. If the customer chooses not to make a final lump sum payment they can continue making 20 monthly repayments at £151.18 and a final repayment of £139.05. This will make the total amount payable £8,605.13.  Annual interest rate 6.0% APR fixed.

M&S Money is also offering the following top tips to potential car buyers, to help them win the battle of the forecourt:

Get your finances in order. There is no harm in hearing about the finance options available at the dealer, however make sure you ask them for the APR and the total amount you will pay, don't succumb to an attractive sounding ‘flat' rate.

Do your research. Know the type of car you want and what suits your needs before you go to the car showroom.

Be firm. Try not to get talked into looking at a bigger or more expensive car.

Be realistic about the amount you will get for your current car in part exchange and base this on its age, condition and mileage. Make sure the car is clean inside and out, and check that all the paperwork is up to date. Alternatively try to sell your car privately; you may receive more for it.

Watch out for hidden costs, like delivery charges, number plates, administration charges, or extended warranties.

Take the car for as long a test drive as you can and use the time wisely to check every aspect of the vehicle.

Play it cool. If you look too keen the car dealer may be less willing to negotiate on price.

To apply for an M&S Car Buying Plan or Personal Loan, visit marksandspencer.com/loans.