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‘Complex’ car finance drives consumers around the bend


Many UK motorists are unable to recognise competitive deals – and some can’t identify what they’ve signed up for.

There’s plenty to mull over when it comes to buying a car – not least make, model, mileage and even colour. But while these factors can be tricky, it seems that Brits are also getting into a spin when it comes to choosing how to fund their purchase.

A new survey from Zopa showed that nearly half the respondents (48%) found the process of taking out car finance at a dealership stressful. And 47% of those who’d recently bought a car with finance couldn’t identify what type of deal they’d signed up for.

The peer-to-peer lender asked people to pick out the cheapest deal from five common car finance options, including hire purchase loans, personal contract purchase (PCP) deals and personal loans. The vast majority – nine in 10 – were unable to identify the lowest cost option.

The study also revealed that over two thirds of UK adults (68%) have accepted the first car finance deal offered to them at a dealership, without shopping around for a better deal.

Didier Baclin, Chief Product Officer at Zopa, said: “Buying a car is a major financial decision, yet it’s so complex it’s nearly impossible for people to work out the best finance option.”

What options are there for car finance?

These are some of the most common options when it comes to paying for your car:

  • Using cash or savings – it may be more cost effective to buy your car outright, rather than take out a loan or finance plan.
  • Joining a hire purchase scheme – this is usually available direct from the car dealership, and you’ll typically put down a 10% deposit; the rest gets divided into a series of monthly payments.
  • Lease your vehicle – you simply pay a monthly rental fee, then at the end of the period, you give back the car.
  • Pay on your credit card – but be aware that not all dealerships will take this form of payment, while others charge a fee for using a card. Remember that credit cards can lead to serious debt problems if they aren’t used sensibly.
  • Take out a personal loan – unlike with hire purchase, with a personal loan you’ll own the car. However, you’ll need to keep up your monthly repayments. If you don’t, the bank will take whatever has been secured against the loan – most likely the car.

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