Drive a hard bargain on car finance
UK motorists are set to waste almost £174 million by signing up to car dealer finance when they buy their new ‘08’ registration cars in March, reveals uSwitch.com, the independent price comparison and switching website.
More than 2.4 million cars were sold in the UK last year, with almost 19% sold in March alone. With a similar number expected to be sold again this year, the research reveals that consumers could waste up to £1,094 each in unnecessary interest payments if they opt for the more expensive credit deal from the car dealer instead of taking out a low-rate personal loan.
For example, a motorist borrowing £10,270 towards the cost of one of Britain’s best selling cars, the VW Golf (costing £11,411 on the road witha £1,141 deposit), would pay 9.4% APR through the finance deal offered by Carselect, costing £2,162 in interest over three years. However, financing the purchase with a personal loan from Moneyback Bank, currently offering one of the most competitive loans on the market at a typical APR of 6.7%, the total amount paid in interest would be £1,068 – a saving of £1,094.
Mike Naylor, personal finance at uSwitch.com comments: “Brand new cars are already a big expense but consumers can unwittingly inflate the purchase price by up to £1,100 by choosing the wrong finance deal. However, there is a simple win-win solution. Finding a competitive loan and having the money ready to buy the car immediately will not only ensure that people get cheaper finance but it also gives them more bargaining power to get the best purchase price. Just because a car dealer can offer you a good deal on a new car, it doesn’t always mean that they will offer the best deal to finance it.”
Naylor’s top tips for new car finance:
Best buy unsecured personal loan rates are only available to people with a good credit history so not all car buyers will be able to get them. However, it’s still worth shopping around as our analysis shows that dealers charge up to 11.8% APR.
Having the money ready before you start car hunting will strengthen your bargaining power as you can make the purchase immediately – you are effectively a cash buyer.
Some car dealers offer 0% finance on new cars, these deals are definitely worth considering if you can get one – you may have to pay a hefty deposit though.
When looking at car dealership finance, make sure you take into account the size of the deposit and the final payment as well as the monthly payments as this can really ramp up the overall cost.
Car dealer finance is not the only way new car buyers can lose out – depreciation is also a big factor to consider as some new cars can lose anything up to 58% of their value in the first year alone.
Leasing deals can sometimes work out cheaper as consumers will not have to pay for servicing and will also rule out depreciation costs.