Shop for personal loan before going car shopping, provider warns

Fri, 24 Feb 2006

Those planning to buy a new car are being urged to carefully consider the implications taking out loans to fund their new wheels.

Research by Alliance & Leicester shows that car dealers offering loans for vehicle purchases charge an average interest rate of 12.8 per cent, as opposed to a personal loan by the bank which has an interest rate of 6.1 per cent.

Alliance & Leicester is encouraging those who are planning to buy a new car to shop around for the best deals available before choosing their motor.

"We urge people to do their financial research first, get their loan agreed within their budget and then go out and choose a car," explains a spokesperson for Alliance & Leicester.

"Arranging your finance before you choose your car could mean you get a decision in minutes and the money in your account in days, whilst saving a substantial sum," the representative adds.

The bank's personal loans manager, Claire Alvey, says taking out a loan from a car dealer could mean that consumers could be "wasting a small fortune".

However, almost a fifth of drivers still follow this route to car financing, Alliance & Leicester found, calculating that they could overpay as much as £20,400 in interest over the loan's lifetime.

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