Buyers are blindly signing up for finance contracts three times more expensive than online deals as used car salesmen don’t explain interest rates properly
SIMPLY walking into a car dealer without securing finance first could cost you almost £2,000, a startling new mystery shopper study has found.
After visiting 100 second-hand dealers up and down the country, figures revealed the average interest rate offered was almost three times more than the deals found by shopping online.
The average APR rate on a dealer contract was 9.4 percent compared to 3.2 percent online, equivalent to £620 a year extra on a standard £10,000 used motor.
Take out the standard three year payment plan and visiting a dealer for finance would mean you’d pay a whopping £1,860 more.
With 2.3 million cars bought on finance in the past year, the additional cost could be an astronomical £1.4 billion a year, according to estimates by Confused.com.
Consumers are blindly walking into pricier deals than necessary because four out of five dealers don’t properly explain how representative APR could end up costing more, according to the research.
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Freebies like services, a full tank of fuel and car mats are being used by pushy dealers to entice customers in but none of these make up for the huge interest rate price gap.
Dealers were also found to be promoting Personal Contract Purchase (PCP) deals where drivers don’t own the car at the end unless they pay a hefty balloon payment. Nearly half of buyers were unaware of this.
Amanda Stretton, motoring editor at Confused.com, participated in the mystery shopping study and said too many motorists are going into dealers and being pushed into deals without understanding their options.
HOW MUCH YOU COULD SAVE ONLINE
Shopping at a dealer:
- Representative APR: 9.4 percent
- Yearly interest: £940
- Three-year interest: £2,820
- Representative APR: 3.2 percent
- Yearly cost: £320
- Three-year contract cost: £960
- Per year: £620
- Three-years: £1,860
Stretton added: “We’ve seen first hand that taking on the wrong deal can cost you thousands, and drivers aren’t always being given a proper explanation of which finance option they’re signing up to.”