Drivers could end up paying ‘considerably more’ when buying cars under finance deals

Martin Lewis discusses car finance payment holidays

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Experts warn drivers must “be careful” and should always “shop around” to secure the best deal. Finance agreements allow drivers to buy more expensive vehicles at a monthly fee instead of putting all the cash down upfront.

However, they warn some bad policies could backfire on motorists and see them pay more than they need to for basic cars.

Data from Compare the Market shows more than half of UK drivers are intending to buy a new or used car in the next six months.

Nearly two-thirds of road users are thinking about using some form of car finance to help cover the purchase.

Rob Silvey, Manager for Car Finance at Compare the Market said drivers run the risk of being “caught out” by finance agreements.

He said: “It is encouraging that so many motorists are keen to hit the road in new cars as lockdown restrictions have been lifted.

“Lots of drivers will be keen to make up for lost time with trips to visit friends and family and staycations.

“Others will understandably want to reward themselves after making it through a tough year.

“However, our research shows drivers do need to be careful to avoid being caught out by car finance when buying a new vehicle.

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“Taking the finance deal offered by a car dealership can be like getting foreign currency at the airport – it may end up costing considerably more for the convenience.

“Drivers should always try to shop around on car finance if they want to make sure they get the best deal.”

The research form Compare the Market found 44 percent who have previously used car finance did not shop around before signing up for a deal.

Almost a fifth admitted to just accepting the car finance deal offered by the dealership selling the car.

This is despite 38 percent believing the dealerships are not offering the best deals.

In January, the FCA introduced a ban on dealerships using “discretionary commission finance”.

Regulators believe this had allowed divers to pay up to £165millionb a year more than they needed to.

Experts at the Money Advice Service still urges drivers to pay with cash upfront when they can afford to.

They said: ”The cheapest way to buy a car is to fund all or part of it in cash.

“This is because you’ll have to pay interest on any loan or finance agreement.

“If you decide to use cash, remember [to] make sure you have enough savings left over for an emergency after you have paid for your car.

“If you don’t have enough savings to buy the car in full, use what you can afford to put down the biggest deposit you can.”

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