Slam the brakes on showroom finance

The 405,000 Brits buying a new car next month could waste a collective £140 million in excess interest payments if they don’t choose the cheapest way to finance a new car.

Deciding what car to buy can be tricky, but determining how to finance the purchase can be a bigger minefield. Research from price comparison website moneysupermarket.com shows driving off with forecourt finance rather than a low-rate loan could cost British motorists an extra £140 million.

A new car buyer spending an average £14,000 and taking a typical manufacturer's finance deal at 7.9 per cent APR would repay a total of £15,707 over three years. However, buying the car with a loan at 6.3 per cent APR means they will repay £15,361.

Tim Moss, head of loans at moneysupermarket.com, said: “New car buyers need to do the sums before taking out car finance or risk being taken for a ride. Taking out a low-rate personal loan will help them avoid paying over the odds.”

moneysupermarket.com also urges drivers who bought a new car last September to carefully review their motor insurance renewal.

Richard Mason, director of insurance at moneysupermarket.com, said: “Many new car buyers received 12 months' free cover last year, which was a great perk. But one year on, you’re likely to find yourself paying a hugely inflated premium, because the renewal is unlikely to be competitive.

“Many insurers will operate at a loss over the first year of an insurance policy, and look to make up the profit on expensive renewals. By comparing insurance premiums now, you can save a great deal of money."