Don't be fooled by car finance packages

MOTORISTS are throwing up to £20,000 away on new car purchases by accepting the dealership's finance package.

As the new 05 registration plates come into force today, thousands of consumers will be heading for car showrooms to test the latest models.

But new research has revealed the average finance deal offered by dealership dwarfs what consumers would pay if they took out a personal loan from a High Street bank.

Despite an average APR of 12.4%, two thirds of car-buyers often use the dealer's finance because they believe it is the easiest and quickest method.

According to research from YouGov, a fifth also believe that if they take the finance they will get a discount on the price of their car or some freebies.

Ash Mukadam, Alliance & Leicester personal loans manager, said: 'Motorists must shop around for their car finance or risk paying sports-car prices for an average run-around.

'It is very easy to get into the habit of taking what the dealer offers, but the difference in how much is paid in interest when compared to a low-rate loan can be vast - enough to put a large deposit on a house or a luxurious round-the-world cruise. Preparation is the key to winning the 'Battle of the Forecourt'.'

Good personal loan deals currently on offer include offers from Barclaycard, A&L, Direct Line and Lombard Direct, all offering around 5.9%. By taking out a personal loan rather than the dealer's finance, car-buyers can save around £1,500 a year, according to the report.