Motorists set to waste millions on over-priced credit
UK motorists are set to waste over £228 million by signing up to car showroom finance deals when they buy their new ‘07’ registration cars on 1st March, reveals uSwitch.com, the independent price comparison and switching website.
More than 2.3 million cars were sold in the UK last year, with nearly a fifth (435,800) sold in March alone. With a similar amount expected to be sold again this year, research from uSwitch.com reveals that consumers could waste on average £1,200 each in unnecessary interest payments if they opt for the over-priced credit deal from the car showroom instead of taking out a low-rate personal loan.
For example, a motorist borrowing £9,995 towards the cost of Britain’s best selling car, the Ford Focus (costing £12,995 on the road), could be charged 10.3% APR through the finance deal offered by Perrys Dealership, costing them £2,698 in interest over five years. However, financing the purchase with a personal loan from MoneyBack Bank, who are currently offering the most competitive loans on the market at a typical APR of 5.9%, the total paid in interest would be £1,538– a saving of £1,160 over the term.
Nick White, Director of Financial Services, at price comparison and switching website uSwitch.com said: “A rushed decision or just taking the finance deal offered by the car dealer could turn out to be a long term financial burden. The average interest rate for a car showroom finance deal is 10.12% APR which is 4.22% APR higher than the best loan rates available and nearly double the current Bank of England base rate.
“Paying too much for car finance is really easy to avoid. People looking to buy a new car this year should first visit a price comparison website such as uSwitch.com to find the most competitive personal loan for their purchase – there are currently four available at less than 6% APR. In fact, by organising the loan before visiting the car showroom, people will not feel pressurised to get the cash quickly to secure the car of their dreams.”