Think twice before you sign up to dealer finance
If you are one of the lucky minority intending to buy a new registration car this autumn, you could save yourself up to £509 just by researching and arranging finance before you get to the garage showroom.
This is according to new findings from comparison website, Confused.com.
It found that the total cost of credit for a £10,390 new VW Polo (after putting down the minimum £104 deposit) is £12,127 when taking finance direct from the dealership over three years - but just £11,618 when taking the cheapest loan from Tesco bank.
Nevertheless, figures from the Finance and Leasing Association show that nearly half of new car purchases (250,000) were bought with dealer finance in the first six months of 2010.
The majority (57%) of this dealer finance was used for personal contract purchase (PCP), where customers pay a set monthly fee and, at the end of the contract, are given the option of buying the car outright, handing it back or using any equity towards a deposit on a different car.
However, not all car finance options lead to outright car ownership at the end of the term so consumers should be sure they know what they are getting.
"Customers should be certain to consider all finance options available before committing to dealer finance when it comes to purchasing a new car as a personal loan may prove the cheaper option," says Chris Griffiths, head of loans at Confused.com.
"They should try to plan their purchase, giving themselves time in advance to review and research financing options, and should shop around."
When looking for a personal loan a good place to start is your existing bank – especially if you have been managing your account well.
However it’s worth comparing what you are offered against other personal loan deals online. Beware of making too many applications as this can damage your credit record.
Motorists should not totally discount dealer finance when making their decision however, as it may include servicing costs and other benefits.