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Recent research from Sainsbury's Bank has suggested that around 7.65 million people in the UK will buy a car over the next six months and that 26% of those purchases will utilise a loan to fund all or part of the transaction. The cost of all these car purchases will amount to £53 billion with £8.46 billion coming from loans, but many people make expensive choices when it comes to selecting their car loan.
The difficulty is the emotional involvement that accompanies a car purchase, combined with the salemanship of many car dealers. Dealers make significant profits from offering finance deals with their cars and often employ specially trained staff to convince customers to take their finance from the dealership rather then letting them shop around. Pressure tactics like suggesting the car may be sold to someone else unless they act quickly or offering price discounts if finance is taken, all form part of the car dealerships armoury when promoting finance. In fact suggestions are that dealerships make more profit from their loans and finance arrangements than they do from selling cars.
The key for the customer is to go prepared, having shopped around for a finance deal in advance. At least you will have an idea whether any loan offered by the car dealership is competitive. With the base interest now at 5.25%, the lowest personal loans start at around six or seven percent, but these may only be available for people with clean credit profiles and needing to borrow more than £10,000.
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