Increasing numbers of insurance firms and other personal finance bodies are warning consumers not to let their desire for a new car cloud their sense of value.
With less than a fortnight remaining until the release of the new 08 number plates across the UK, many motorheads are sure to be checking their wallets to see if they can splash out on a new vehicle. However, regardless of whether the dream purchase is a hotrod or simply a reliable runaround, consumers are being advised to look for the best low rate loans available to fund the deal.
According to insurer esure, considering how to finance the exchange when splashing out on a new car is "way down the list of motorists' priorities". It claims that while one in six (15 per cent) consumers spend a significant number of hours turning the pages of car magazines and researching on the internet to establish which car they want to buy, as many as one in three spend less than an hour considering how they intend to support the purchase. Additionally, many do not understand the lingo involved, with more than nine in ten (92 per cent) unable to define lease purchase - an industry term for forecourt finance. Many commentators have asserted that low rate loans are a more cost efficient way of dealing with the financial outlay of buying a car.
Insurer esure also observes that the price of a vehicle is not always as concrete as it might appear when first venturing on to the forecourt. "The price tag on a new car is never fixed in stone and haggling could potentially result in savings of hundreds of pounds, yet only two thirds of Brits (65 per cent) would negotiate or bargain on the price of the new car," the company states. "Surprisingly, Brits are more likely to negotiate at a car boot sale to save their pennies (78 per cent) rather than on a car forecourt to save their pounds."
Price comparisons site moneysupermarket has also added its voice to those warning against forecourt finance. It suggests that those looking to buy a new car but failing to seek out the best low-rate loans could fritter away almost 1,000 pounds on interest payments alone. Furthermore, it estimates that, should the expected 425,000 new cars being purchased next month involve forecourt finance, a total of 402 million pounds in extra interest could be shelled out by the buyers. Tim Moss, head of loans at moneysupermarket, said: "It is vital to shop around for the best deal to finance your new car to help you avoid paying over the odds."
Low-rate loans are not only useful for covering the costs of an initial purchase, however. According to figures published last year by price comparisons service uSwitch, young drivers could also find that their premium costs have a significant impact upon their financial situation. Furthermore, any convictions accrued could cause their premiums to soar by as much as 55 per cent, at which point a low-rate loan might be a convenient way of spreading the burden.
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