Car buyers will bag a forecourt bargain this month

Despite the credit crunch, around 360,000 consumers are expected to hit the forecourts this weekend to ‘bag a bargain' as they cash in on dealer's desperation to shift excess stock. However, new research from uSwitch.com reveals that this hard haggling could be completely negated by signing up to the wrong finance deal, inflating the average purchase price by as much as 51%. This is hardly surprising as less than one in three (32%) of these shoppers will actually invest any time in looking at finance deals before they start test driving. In fact, a staggering 246,000 consumers will only start to think about finance once they've found the car.

This could be a very dangerous way of shopping as unsecured loan rates have continued to increase this month. Providers such as Barclays Bank, Britannia Building Society and Sainsbury's Finance have all increased selected rates by as much as 1% - however, Sainsbury's still retains a place in the best buy tables. This has pushed the average loan APR up to 9.45% with best buys rising from just 6.8% APR to 8% APR in the last 12 months alone. Now more than ever, savvy car shoppers need to focus their attentions on finding a competitive loan as well as a bargain motor.

The average purchase price of the top ten best selling cars in the UK is £13,631. A best buy loan from Alliance and Leicester at 8% APR will inflate this cost by 20% to £16,474 which could immediately negate a large chunk of any discounts negotiated. In a worst case scenario, this research lethargy could cost new car buyers up to £6,887 in interest payments on top of the cost of the car, inflating the cost of the car to a staggering £20,518.

Louise Bond, personal finance manager at uSwitch.com comments: "Shopping around for competitive loan before shopping around for the car is essential. Buying a brand new car is a big expense which can be seriously inflated if the financial arrangements are not researched thoroughly. It would be such a shame to bag a bargain on the forecourt this weekend only to wipe out the savings with an expensive loan. Having the money available before choosing a new vehicle can also add to your bargaining power when on the forecourt - you may find you are able to drive down the cost of the car as you strike an immediate deal."

Louise's top tips for car buyers:

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 there are still quite a few good deals.

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.

Leasing deals can sometimes work out cheaper as consumers may not have to pay for servicing and repairs.

For consumers with a poor credit score, leasing could be next best available option as they are not actually buying the vehicle.

It is also worth looking at cars that have been pre-registered by a dealer. They only have a few miles on the clock so in effect you get a nearly brand-new vehicle at a second-hand price.

The collapse of a motor manufacturer can have a knock-on effect on a car's re-sale value plus the availability of vehicle parts - these factors should be carefully considered by potential buyers.

As well as haggling on the price, look for free extras such as extended warranties and service packages.

Finally, watch out for new Government initiatives. Ministers are currently looking at introducing a ‘scrapping incentive scheme' where motorists will be offered up to £2000 to scrap cars over nine years old. This may be worth holding out for.