Check out the best finance deal for your new car
Michelle Slade, analyst at moneyfacts.co.uk comments: “As 1st March draws near, keen motorists will be spending the next couple of weeks shopping for their shiny new car, bearing the ‘07’ registration. Many will have been searching garages up and down the country to find the most competitive deal, feeling pleased with themselves in obtaining the added ‘freebies’ of car mats, mud flaps and a tank of petrol. But they should not be lulled into the trap of buying ‘forecourt’ finance without first shopping around. It can be a very costly mistake!
“The market for personal loan business is incredibly competitive, allowing consumers to reap the benefits by means of lower rates. Although sub six percent loans have become almost extinct, there are still some great deals to be found, charging around 6% to 7%, which is still only a 1.75% margin over bank base rate, and is fixed for the duration of the loan.
“With around 60 unsecured loan providers on moneyfacts.co.uk, it is worth spending a bit of time to secure the best deal to finance your new car. After all, you’re happy to spend ages finding the right car, so why not apply similar logic to your search for vehicle finance?
“Take for example a 5-year loan of £10K; at 6% the total interest payable would be £1,555.40, compared with £2,621.60 at 10%, a potential saving of £1,066.20. So with a little time spent to secure the best finance deal, you could have paid for the extra upgrades such as a climate pack or spoiler.
“But two words of warning. First around 85% of loans use typical pricing, so bear in mind that the rate advertised may not be the actual rate you pay, this will be determined by your credit rating.
“Secondly, should you choose to take optional payment protection, the costs will vary significantly between lenders. Previous Moneyfacts research has shown that premium and associated interest on a £5K loan over three years can vary by up to £800. Sourcing this cover from independent companies such as British Insurance and Paymentcare can see the costs lowered to around £300, a staggering £1000 less than the most expensive loan provider’s policy.
“Taking any form of personal lending is a long term commitment, and in the case of personal loans is normally at a fixed monthly premium. It can be inflexible with only a few providers allowing repayment holidays and most charging early redemption fees. Remember cars depreciate in value at a rapid rate, so bear this in mind when choosing how long you repay the loan over. Don’t let your loan outlive your car!”