The cost of financing your car could increase by 26% just by choosing the wrong loan
Samantha Owens, Head of Personal Finance at Moneyfacts.co.uk – the money search engine, comments:
“With just over a week to go before the new 57 plates will be hitting our roads, many motorists will be searching garages up and down the country for their new cars. However, I suspect much less time is invested in searching for the best finance deal. Get your finance choice wrong and it can prove a costly mistake.
“Before opting for the convenience of forecourt finance, it’s worth checking out how this compares with other deals on the market. There are over 50 providers offering a range of unsecured loans and plenty of options available to borrowers. But with such a wide range of choice, comes a wide range of rates and deal types.
“Latest Moneyfacts.co.uk research has shown that, on a £5K loan, the difference between choosing the best and worst loan deal could cost you an extra £861, while the wrong choice on a £10K loan could see you out of pocket by more than £2.6K – or to put it another way, increases the cost of financing your car by a massive 26%.
£5K / 3 years
Without insurance |
|||
|
Provider |
Monthly Repayments |
Total Cost |
Cheapest |
Yourpersonalloan.co.uk |
£152.39 |
£5,486.04 |
Most expensive |
Lloyds TSB |
£164.50 |
£5,922.00 |
Difference |
£12.11 |
£435.96 |
|
With insurance |
|||
|
Provider |
Monthly Repayments |
Total Cost |
Cheapest |
Leeds BS |
£173.84 |
£6,258.24 |
Most expensive |
Britannia BS |
£197.78 |
£7,120.08 |
Difference |
£23.94 |
£861.84 |
|
Moneyfacts.co.uk – the money search engine |
|||
£10K / 5 years
Without insurance |
|||
|
Provider |
Monthly Repayments |
Total Cost |
Cheapest |
Yourpersonalloan.co.uk |
£193.91 |
£11,634.60 |
Most expensive |
Egg |
£210.09 |
£12,605.40 |
Difference |
£16.18 |
£970.08 |
|
With insurance |
|||
|
Provider |
Monthly Repayments |
Total Cost |
Cheapest |
Leeds BS |
£224.61 |
£13,476.60 |
Most expensive |
Britannia BS |
£268.82 |
£16,129.20 |
Difference |
£44.21 |
£2,652.60 |
|
Moneyfacts.co.uk – the money search engine |
|||
“Moneyfacts.co.uk - things you should consider when shopping for your car loan:
- When shopping around for your new loan, use the total repayment figure to compare deals. This is especially important when opting for providers insurance, as a competitive interest rate can more than be wiped out by expensive payment protection cover.
- Shop around for your loan, and for the best possible package shop around for your insurance separately. Independent providers such as Paymentcare.co.uk and British Insurance offer a more flexible insurance package at a fraction of the cost.
- 91% of loan rates are either typical pricing or personal pricing, so don’t assume that the rate advertised is the rate you will receive, as this will depend on your credit rating.
- Don’t be fooled by specialist car loan deals. Often the freebies, discounts or perks don’t make economical sense if you have to pay a higher interest rate. The Barclays deal unveiled this week offers an interest rate of 7.4% typical, 1.1% above the best deals in the market. The package includes discounted RAC breakdown cover and a free HPI check, which can make saving of up to £81.45 in year one, plus a maximum 10% discount off Barclays car insurance for online applications. Motorists need to do their sums to see if the savings are worth incurring a higher interest rate. Specialist deals don’t always offer the most competitive packages. Sometimes it makes more financial sense to choose a generic product.
- Be realistic about the term of the loan you choose. Cars suffer rapid depreciation, so make sure that you don’t find yourself still paying for your car long after it has reached the scrap yard.
- Be aware of the cost of repayment holidays. For example, If you took a loan of £10k over five years at 6.5% APR and took a three month repayment holiday at the commencement of the loan, you would pay an additional £124.74 in interest charges
Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.
Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.
Go Direct.co.uk is a trading style for website purposes of Go Direct UK Ltd.
Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600
We normally do not charge a fee for mortgage advice, however this is dependent on your circumstances. Our typical fee would be £349