Personal loans could offer benefit over forecourt finance

Financial advice website Moneysupermarket has reported that new car buyers could be wasting up to £2.9 billion by opting for dealer finance over personal loans.

If a motorist buying a new car did so with a low-rate personal loan rather than an offer from the car dealer, they could save more than £1,200, the site claims.

As an example, a driver who buys a car for £14,625 on finance at 11.6 per cent APR would repay a total of £16,973.47, including interest and deposit, over three years.

A loan with Moneyback Bank, on the other hand, which currently offers a rate of 5.6 per cent on amounts up to £25,000, would lead to a total repayment of £15,771.07.

“Our figures show consumers should be wary of showroom finance deals,” said Stuart Glendinning, managing director of Moneysupermarket.

“Taking out a low-rate personal loan instead means they can avoid paying over-the-odds.”

The site also urged car buyers who bought a new car last year with free insurance to review their cover before they renew it, as shopping around could avoid encountering uncompetitive premiums.