Will You Finance Your New Car with a Personal Loan?

As the 1 September approaches, the date for new car registrations, many will be turning to a personal loan to buy their new car. But where is it best to get such a loan from?

Nationwide Building Society figures show 37% of customers take out a loan for this reason.

According to the Society of Motor Manufacturers and Traders, the most popular car on the market is the Ford Fiesta, which costs around £10,000.

Many people will take a personal loan from their current account provider to buy their car, but for some this could be a costly mistake.

Nationwide research shows current account customers of some of the big banks could be spending nearly £1,100 more than Nationwide customers when buying a Ford Fiesta.

Cost of £10,000 loan over 5 years

	Representative APR	Monthly Repayment	Total Repayment
Nationwide	6.3%	£193.91	£11,634.60
RBS	7.9%	£201.00	£12,060.00
Halifax	8.8%	£205.20	£12,312.00
Lloyds TSB	8.9%	£205.65	£12,339.00
Barclays Bank	9.9%	£212.13	£12,727.80
Difference between Nationwide and Barclays Bank			£1,093.20

For Nationwide FlexAccount customers who use this account as their main current account, the personal loan rate is 6.3% APR Representative. This interest rate is applicable for loans of up to five years between £7,500 and £14,999 and can be taken out through a branch, over the telephone or via the internet.

If you don’t have a Nationwide current account, you can either open a Nationwide current account in a branch and make it your main account in order to qualify for this interest rate or you can take advantage of a competitive rate of 6.8% APR Representative. This offer is available if customers apply via an online comparison website, such as Moneysupermarket.com, for loans between £7,500 and £14,999, for a term of up to five years. 

Paul Wootton, Nationwide’s head of personal loans, commented: “People will often put the time and effort into shopping around to find a new car, but when it comes to securing the finance they opt for the first deal they are offered.

“Buying a new car can be expensive, but taking the time to research your finance options could save nearly £1,100.

“While some car dealerships offer interest-free hire purchase, in many cases it’s part of a special promotion on selected models and often requires a high deposit.

“The Nationwide personal loan offers one of the lowest rates in the market and is worth considering to finance that new car.”

MoneyHighStreet comments: “We totally agree that if buying a new car you really do need to take the time to research your personal finance options.

“Also though, don’t just work on the base cost of the car when working out your budget. Remember the running costs of the car can be high.

“There’s the mandatory car insurance. There’s also GAP insurance that you might like to consider – this basically protects you if you write off your car and your car insurance policy doesn’t pay enough to settle any outstanding loans on it or the cost of replacing it.

“There’s ongoing maintenance too, perhaps an MOT and of course the ever rising cost of fuel.

“Include all these in your budget and make sure however you intend to finance it you can actually afford your car, both the upfront cost and the ongoing charges.”