13/08/03

According to research by the AA, the UK’s leading motoring organisation, millions of pounds will be wasted in September’s car-buying spree because buyers don’t shop around for finance.

In fact, the survey by AA Financial Services found that male motorists stand to lose more than
women, as they are least likely to plan their finance.  More than 60 per cent choose a new motor first, over half spending less than a week doing so.  Only then do they think about how they’ll pay for it, wasting on average £1,000 by not shopping around for the best finance deal.

In marked contrast to men, women are more likely to arrange their finance first.  Nearly half make sure they can afford their car – and then, on average, spend twice as long as men choosing it.

But regardless of sex, the AA found that three-quarters of car buyers go no further than their bank (51 per cent) or the car dealer (27 per cent) to arrange funding. 

“These can be some of the most costly places to arrange car finance,” says Neale Phillips, the AA’s general manager, Financial Services.  “It’s really surprising that people don’t seem to spend just a few minutes shopping around for the best deal.

“Last year, a staggering £21.6 billion was lent by banks to buy cars and a further £11.7bn was
borrowed through car dealerships and other providers.¹  The AA estimates that up to £1.3 billion of this is being wasted because people are paying higher interest charges than they need,” he says.

“In fact, a car buyer borrowing £10,000 over five years, could save nearly £1,900 – enough to pay for a two week-long luxury holiday in the Caribbean for two people – just by choosing a low-cost loan!”² says Phillips.  “Even a loan of £7,500 could net you a saving of over £1,700.

“Buying a car is the most expensive single purchase, other than a home, that most people make.  Yet such an important decision is often not properly thought through.  With the new ‘53’ car registrations coming up soon, there will be hundreds of thousands of new and second-hand cars changing hands over the next few weeks.”

The AA recently cut its on-line rate to 6.6 per cent for loans of £5,000 or more – making it one of the cheapest unsecured rates currently available to UK borrowers. ² 

“This compares with 13.6 per cent, the most expensive similar unsecured loan rate.²  Some other finance arrangements, particularly those often offered at point of sale such as hire purchase, can sting you for even more,” warns Phillips.

“The message is clear: don’t let your heart rule your head.  It’s easy to be seduced by the gleaming bodywork on the forecourt.  Start by shopping around for your finance and don’t just go for the first offer you get.  You and your partner could end up sunning yourselves on a palm-fringed beach with the money you’ve saved.”

Provided by the AA