PERSONAL FINANCE: Beware the Fully-Loaded Car Loan
Motorists are wasting pounds 20,000 over a lifetime on pricey car finance deals, according to new figures.
Research from Alliance & Leicester found that two thirds of customers always accept the offer of a dealer's finance package.
But with the average car now costing just under pounds 12,000, the difference between dealer finance at an average APR of 12.4 per cent and a personal loan can be as much as pounds 1,800, the bank calculates.
Yet more than half (52 per cent) think dealer finance is the quickest and easiest method and 17 per cent believe dealers offer the most competitive deal.
A fifth (21 per cent) also believe that if they take the finance they will get a discount on the price of their car or some freebies.
The average UK motorist buys a new car every four and a half years. Nearly half (46 per cent) generally use savings and a quarter (25 per cent) will use a personal loan to finance the purchase.
Of those who financetheir new car through a dealer, more than a quarter (27 per cent) use this method because they have simply 'always done it this way' and it is 'just what they are used to now'.
More worryingly, nearly one in ten (nine per cent) are talked into it by the car salesman.
Ash Mukadam, Alliance& Leicester personal loans manager, said: 'Motorists must shop around for their car finance or risk paying sports-car prices for an average run-around.
'It is very easy to get into the habit of taking what the dealer offers, but the difference in how much is paid in interest when compared to a low-rateloan can be vast - enough to put a large deposit on a house or a luxurious round-the-world cruise. …