Car dealership finance could prove costly

A new report has shown that as motoring enthusiasts gear themselves up for the arrival of the 2007 number plate cars, due to hit the showrooms at the end of March, many could end up wasting a small fortune by rushing into a finance deal with a car dealership rather than shopping around for a better value deal from more traditional lenders.

In the rush to get their spanking new car many people forget that they need to spend time looking around for finance as well as trying to find the perfect vehicle, and often this leads to a rushed decision to take finance through the dealership in order to get the desired vehicle.

According to recent data from uSwitch consumers in the UK could end up wasting around twelve hundred pounds on the cost of taking out finance, which collectively could equate to nearly £230m. The finance deals offered by some car dealerships can be way more costly than loans from more traditional lenders, but after spotting the car of their dreams many people rush into taking out the finance without stopping to think about the cost of not shopping around for their car finance.

One spokesperson from uSwitch said: 'A rushed decision or just taking the finance deal offered by the car dealer could turn out to be a long term financial burden. The average interest rate for a car showroom finance deal is 10.12% APR, which is 4.22% APR higher than the best loan rates available and nearly double the current Bank of England base rate.'

Consumers that are planning to invest in a new vehicle are advised to look into finance before going out to find their dream car, as this can help to avoid the temptation of signing up to costly finance deals. Once you have the finance secured through a low cost lender you can then shop around for a vehicle that fits in with your budget, and you can enjoy far lower interest rates on your borrowing.

Tom Smith
01.03.07

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