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Sep 6, 2006
Alliance &
Leicester Personal Loans has warned car buyers that they might end up losing up
to £1,400 if they sign up for a finance package with automobile dealers.
According to a new research from the loan provider, almost half of those who
borrow money to buy a car ultimately end up with an uncompetitive finance deal
that may leave their finances exhausted.
A&L says almost one in five (18%) car owners typically used finance from a
car dealer to purchase their car - with four in ten (38%) of those claiming it
was for reasons of convenience. However, despite many car dealers’ interest
rates set well into double figures, one quarter (24%) of borrowers believed
that the finance deals offered by car salesmen were the most competitive
available. A further six percent admit to signing up after a salesman convinced
them that their finance was the best deal available.
Statistics from A&L show that, on average, people borrow £9,000 when they
buy a new car. Borrowing this amount on a four-year hire purchase agreement
with Citroën, at their typical rate of 13.2%, will mean paying almost £2,500 in
interest - almost £1,400 more than what is offered through a typical personal
loan rate of 5.9%. For 4% of borrowers who chose to flex their plastic and buy
a car using their credit card, which typically charge upwards of 15%, the cost
could be much more, A&L added.
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