Today the latest 17 registration cars go on sale, however number plates aside, there are more important things you shouldn’t leave to chance when it comes to changing your car and that includes finding the cheapest finance.
It’s important to do your homework before setting foot on the garage forecourt; otherwise you could end up paying over the odds for your new wheels.
There are plenty of options when it comes to vehicle finance, but don’t fall into the trap of assuming that borrowing from your own high street bank is best the way to go.
If you’re looking to borrow £7,500 or more then the banks are keen for your business and are offering some record low rates at the moment , including TSB and Sainsbury’s Bank both offering 2.9% APR as long as you’ve got an excellent credit rating.
However if you only need say four thousand pounds or less on top of your part exchange value, this is where the banks are much more expensive.
If you wanted to borrow £4,500 for example, the average personal loan rate is a whopping 16% APR with some banks such as Lloyds charging as much as 26.3% APR, so you can see that it makes sense to shop around to avoid being ripped off.
If you’re comfortable that you can afford to repay what you need to borrow within 30 months or just over, it’s worth considering a credit card offering a promotional interest free deal on purchases, as long as your garage will allow you to pay by card.
The latest credit cards from Halifax and Sainsbury’s Bank are worth a look, giving you 30 months and 29 months respectively to repay your borrowing without charging you a single penny in interest.
If you’re not sure you can manage to repay within that sort of timescale or that the dealer won’t take plastic, another excellent low cost option is the MBNA5 credit card from MBNA.
This credit card charges a low rate of interest fixed at just 4.9% APR fixed for 5 years on all transactions made in the first 60 days after that it’s 8.9% APR but still more than 10% APR less than the market average.
There is a one off money transfer fee to pay of 0.5% of the amount borrowed, but unlike the vast majority of credit cards, this plastic enables you to transfer money into your bank account, so gives you much more flexibility when it comes to buying your car.
You can also set up a regular direct debit so in essence although it’s a credit card you can take full advantage of the low rate and fixed direct debit to use MBNA5 like a personal loan and save yourself thousands of pounds compared with the big banks (see table below for examples of cost savings).
Just as we spend hours thumbing through car magazines and researching websites to find that must have motor, It’s equally as important to shop around when it comes to sorting out the finance.
|Cost of borrowing £4,500 over 60 months|
|Lender||APR||Monthly repayment||Total repayable over 60 months||How much more expensive than cheapest deal|
|MBNA (MBNA5 card)||4.9%||£84.71||£5082.87||N/A**|
|Hitachi Personal Finance||6.9%||£88.45||£5307.00||£224.13|
|Research by Moneycomms.co.uk 16.02.2007|
** If you make a money transfer from card to current account there is a 0.5% fee in this example would be £22.50