Costly forecourt finance could drive motorists round the bend

Driving off with forecourt finance rather than a low-rate loan when buying a new 56 plate car could cost UK motorists up to £2.9 billion.

New figures released today show new car buyers could each save more than £1,200 by shunning showroom finance and opting for a low-rate personal loan.

The figures, from price comparison website moneysupermarket.com, reveal a driver buying a new Vauxhall Astra Club costing £14,625 via the Vauxhall finance deal at 11.6 per cent APR would repay a total of £15,510.96 over three years. However, buying the car with a personal loan with Moneyback Bank, which currently offers 5.6 per cent APR typical on sums up to £25,000, instead means the buyer will only repay a total of £14,308.56 -a saving of £1,202.40.

Stuart Glendinning, managing director at moneysupermarket.com, said: Our figures show consumers should be wary of showroom finance deals. Taking out a low-rate personal loan instead means they can avoid paying over-the-odds. Many car buyers will spend a lot of time researching the price to pay for a car, to make sure they get a good deal. They need to make sure they avoid the sucker-punch of taking an uncompetitive loan and need to be aware of the best loan deals also.

moneysupermarket.com also urges drivers to review their car insurance quote before they renew, particularly those who bought a new car last September with a year’s free insurance.

Glendinning said: "Free insurance is clearly a valuable perk for new car buyers. But if you don't shop around when the deal comes to an end, you could quickly see your savings wiped out by uncompetitive premiums. If you stay put with the policy your car dealer arranged for you, it's highly likely youll end up paying over the odds.

"Insurance is one of the biggest costs of running a car, and the savings to be made by routinely reviewing your policy each year are huge."

The comprehensive motoring service moneysupermarket.com/motoring, launched in September 2005, enables drivers to compare the cost of buying the car of their choice from different leading retailers. The website also has loans and insurance sections which enable customers to find best low-rate personal loans and insurance on the market quickly and easily.