When buying a new registration car this autumn, savvy shoppers could save up to £509 simply by sorting out their finance before heading to the garage, according to new findings from
Confused.com.
Figures from the Finance and Leasing Association, for the first six months of 2010 show more than a quarter of a million new car buyers used dealer finance to fund their purchase, equating to nearly half (49.4 per cent) of new car purchases.
The majority (57 per cent) of this dealer finance was used for personal contract purchase (PCP), where customers pay a set monthly fee and at the end of the contract have a choice of whether to hand the car back, buy it outright or use any equity towards a deposit on another car.
Whilst the different car finance options can look like an attractive proposition to fund a new car purchase, they don't all lead to outright car ownership at the end of the term.
For those whose aim is to fully buy the car, these deals might not be the most cost effective finance option, and it could pay to sort out a loan before heading to the local dealership, says
Confused.com.
"When it comes to purchasing a new car and before committing to dealer finance, customers should be certain to consider all finance options available, as a personal loan may prove the cheaper option,” said Chris Griffiths, Head of Loans at
Confused.com.
“Consumers should try to plan their purchase, giving themselves time in advance to review and research financing options, and should look to shop around.
“When looking for a personal loan a customer's existing bank is a good place for them to start, as preferential rates may be available for existing customers, but they should still be compared against deals available online and elsewhere.
“Borrowers should be sure not to only use the headline APR to weigh up which option will be cheaper, but make sure the monthly repayment amount stacks up, that it is affordable and check the total cost for credit as set up fees may be applied.
“Lastly, consumers shouldn't totally discount other potential benefits when making a decision, for example dealer finance may include servicing costs while a personal loan provider may allow a payment holiday to be taken during the term of the loan."
New VW Polo, £10,390, deposit £103.90, amount financed £10,286.10, three year repayment period:
|
|
Typical APR
|
Monthly repayments
|
Total amount repaid (inc £103.90 deposit)
|
Cost of credit
|
Cost of credit compared to VW finance offer
|
|
VW finance offer
|
8.0 per cent APR
|
35 x £206.68
1 x £4,729.05
|
£12,127
|
£1,737
|
N/A
|
|
Tesco Loan
|
7.7 per cent APR
|
36 x £319.83
|
£11,618
|
£1,228
|
-£509
|
|
Sainsbury's Loan
|
7.8 per cent APR
|
36 x £321.38
|
£11,673
|
£1,283
|
-£454
|
|
Zopa Loan
|
8.7 per cent APR
|
36 x £324.36
|
£11,779
|
£1,390
|
-£347
|
|
Post Office Loan
|
8.9 per cent APR
|
36 x £324.93
|
£11,801
|
£1,410
|
-£327
|
Find out the latest savings accounts by receiving our
MoneyMaker newsletter.
