More Personal Loans Used to Finance Car Deals

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Mon, 26 Oct 2009

A new report from Sainsburys Finance has revealed a significant increase in the number of consumers taking out personal loans to cover the cost of a new car . A personal loan can often provide a cheaper form of credit than car finance deals, with lower interest rates, resulting in a 37 per cent increase in the number of loans used to fund the purchase of a new car. The government’s car scrappage scheme, introduced on May 18th, is being cited as the main reason for the increase.

The increase means that Ł61.2 million of personal loans have been taken out every month to cover the cost of new cars since May 18th, compared with an average of Ł44.7 million prior to the introduction of the scheme. The average amount borrowed was Ł7,515.

Nearly 370,000 new cars were registered in September according to The Society of Motor Manufacturers and Traders. That figure represents at 11.3 per cent increase on the previous year, and is good news for the ailing motor industry.

However, debt experts are warning consumers not to get sucked in by the scrappage scheme if they cannot afford to buy a new car . The Ł2,000 benefit of the scheme is vastly undermined by the depreciation of a car as soon as it leaves the showroom, experts are warning.

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