Car buyers wasting money on pricey loans

Only a minority of motorists shop around for the best loan deal to finance their new car.

New research reveals that the majority of motorists seek value for money when buying a new car, but only a minority shop around for the best deal to finance their purchase.

Seventy-one per cent of motorists place good value as an important factor in buying a car, but just 40 per cent shops around for a low interest loan, according to Alliance & Leicester Personal Loans.

Almost 5.5 million motorists (17 per cent) are lured by pricey car showroom finance to pay for their car, even though the average showroom APR is 13.3 per cent.

The research points out that the average showroom loan costs £1,700 more over four years that an A&L loan, at 6.4 per cent, on a car of £12,000.

Yet 52 per cent of motorists think dealer finance is the quickest and easiest method, while 17 per cent believe dealers offer the most competitive rates.

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," he added.