Shop around for car loans and avoid PPI

August 30th, 2008

As the time for new number plate’s rolls around again, Consumers are being urged to dedicate more time to choosing the right car loan or finance package. The launch of the new 58 plates is expected to be preceded by a flurry of interest in car loans, despite the credit crunch.

However, Moneyfacts.co.uk has warned that choosing the wrong method of financing a purchase can be a “costly mistake”.

According to the firm, there are now more than 40 providers offering unsecured loans and the difference between the best and worst deals on a £5,000 loan can be £769. The company noted that for a £10,000 loan, this figure rises to £2,400.

It sounds obvious, but before opting for the convenience of forecourt finance, it’s worth checking out how this compares with other deals on the market.

Specifically when purchasing a new car, buyers ought to consider how quickly their car’s value may depreciate and take out a loan with a reasonable term, Moneyfacts.co.uk has suggested.

The Finance and Leasing Association recently reported that in the 12 months to June this year, half of all new cars were bought using dealer finance, compared with 46.2 per cent a year earlier.

Motorists who fail to shop around for car finance can end up paying thousands of pounds more in interest repayments than is necessary. The effort to shop for a cheaper deal at one end of the loan period always pays dividends at the other.

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. The site named the cheapest provider of loans of £5,000 over three years as Sainsbury’s Bank.

Also in the car market, five motor dealerships have been fined by the Financial Services Authority (FSA) for mis-selling payment protection insurance (PPI). Between them the five were fined a total of £175,000.

The five dealerships are GK Group, George White Motors, Ringways Garages (Leeds), Ringways Garages (Doncaster), and Park’s of Hamilton.

The FSA said they had failed to check if the customers circumstances meant they might be excluded from claiming on a policy after it had been sold, and did not monitor the quality of advice being given by their sales staff.

I believe I have made my feelings about PPI clear over the last few months but for those not paying attention I shall reiterate. It is a scam! Avoid it at all costs! If you are concerned about making repayments on a loan, it is possible to purchase separate insurance which will almost certainly give you better cover and be more responsibly sold than that bundled with the original loan.

In June this year the Competition Commission found that people were being overcharged by the financial services industry to the tune of £1.4bn a year when they PPI policies.

It said this was due to a lack of competition, and suggested that one remedy might be a ban on firms selling the insurance when they take out loans. The wider publicity being given to the problems of PPI led earlier this year to the Financial Ombudsman Service receiving a surge of complaints about alleged mis-selling.

This entry was posted on Saturday, August 30th, 2008 at 10:21 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Shop around for car loans and avoid PPI

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