Motorists choose value for money but lose out on pricey finance
British motorists risk wasting more than £18,000 over a lifetime by using pricey finance deals from the car-showroom to pay for their cars, research from Alliance & Leicester Personal Loans reveals.
With the 1st September launch of the new ‘55’ registration plates just around the corner, the findings show that the majority of motorists (71%) believe value for money as an important factor when choosing a new car. Despite looking for good value when choosing their car, when it comes to financing the purchase, only 40% of those who need finance always shop around to find the best deal.
In fact, almost 5.5 million motorists (17%) opt for pricey car showroom finance to pay for their car, even though the average APR charged by car dealers is 13.3%. With the average motor now costing nearly £12,000, the average showroom finance over four years costs £1,700 more than a low-rate personal loan with Alliance & Leicester at 6.4%. As a typical motorist buys, on average, 11 cars over a lifetime, they could be wasting a staggering £18,791 by repeatedly using car dealer finance!
Along with value for money, the vast majority of motorists believe that reliability (72%), good fuel efficiency (66%) and comfort (58%) are important when buying a car, rather than speed & performance (11%), and style (9%).
Furthermore, the idea that motorists’ dream cars are high-performance, luxury sports models has been dispelled by the research, which found that more than a third of Brits’ would prefer a ‘family car’ (39%) or a ‘small economical hatchback’ (20%), with just 5% dreaming of a sports car, and 3% aspiring to have a convertible.
But it seems this common sense attitude doesn’t filter through when considering how to finance the new car. Some of the reasons consumers have got into the bad habit of using car dealer finance include:
Over half (52%) think dealer finance is the quickest and easiest method
One in six (17%) believe dealers offer the most competitive deal
A fifth (21%) believe, if they take the finance, they will get a discount on the price of their car or some freebies.
More than a quarter (27%) are simply in the habit – they have "always done it this way – it’s just what I’m used to now".
One in ten (9%) are talked into it by the car salesman.
Andy Bayes, Head of Personal Loans at Alliance & Leicester explains: "Despite the fact that so many motorists appreciate the importance of value for money when it come to buying a car, millions of them do not practice this when it comes to financing their motor. It may seem easy to take the finance that is being offered at the car showroom, but compared to a low-rate personal loan, it can cost a small fortune.
"I urge anyone considering buying a car this autumn to look around for their car finance first, and base their decision on the rate being offered, not just the freebies and discounts on offer from the car showroom.
"Those who are already tied to a finance deal from the showroom should consider switching their debt. It is quick and simple to do and will rid people of their double-digit interest rate, and replace it with a much more affordable low-rate loan."