Wrong car loan can cost thousands

The price paid for a car with one of the new 58 registration plates could be £2,400 higher than necessary if the buyer selects the wrong car loan.

Research by Moneyfacts shows a 14 per cent difference between the most and least competitive car loans.

The worst deal on a £5000 loan commands an additional £769 in repayments, when compared with the best deal. For a £10,000 loan, the difference rises to £2,400.

Michelle Slade, Moneyfacts analyst, said: "Before opting for the convenience of forecourt finance, it's worth checking out how this compares with other deals on the market. There are over 40 providers offering a range of unsecured loans and many offer different rates depending on if you apply online or over the telephone."

It's important that buyers keep the total repayment figure in mind when securing a car loan, particularly if the provider is encouraging the buyer to take out insurance protection as well. Even the most competitive interest rate on a car loan can be wiped out by expensive PPI.

The length of the repayment period should also be carefully considered. Cars depreciate rapidly, so it doesn't make sense to take out a car loan with a lengthy repayment period.

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