Car finance and lease deals are becoming increasingly more popular in the UK and offer motorists the opportunity to drive a new car without having to shell out the full cost upfront.
In fact, Brits spent £36.9 million on car finance in 2018, showing the popularity of these deals.
However, drivers could save hundreds of pounds by just looking for an APR which was one per cent lower.
Admiral Car Finance has launched a new APR comparison tool to highlight the financial benefits by shopping around for car finance.
Input a loan value, loan term and interest rate into the tool and it calculates the potential saving of an equivalent loan that has an interest rate – or APR –just 1 per cent lower.
The results reveal how much extra fuel drivers could afford with the money saved.
Scott Cargill, CEO at Admiral Car Finance, said: “It’s easy for people to assume that a slightly higher APR outweighs the effort of shopping around for car finance before you hit the dealership, but that’s certainly not the case.
“One per-cent doesn’t sound like a lot, but the savings that can be made from a slightly lower APR can be huge.
“It’s also important you know up front the total amount you will pay for the loan. If you decide to finance your new car with a personal contract purchase, be aware there’ll be a balloon payment due at the end.”
Based on typical borrowing values, terms and rates for a range of cars uncovered that motorists could save between £90 and £500 for an APR of just one per cent lower.
For example, a driver borrowing £25,000 over four years could save themselves £500 if they were to cut their interest rate from 12 per cent to 11 per cent.
Similarly, a driver borrowing £12,00 for five years could also save themselves £300 for reducing their APR from seven per cent to six per cent. The research also found out how much the savings could translate into when buying fuel.
Admiral found that a saving of £91.80 could fuel 835 miles of driving, equivalent to over a month’s worth of fuel at typical mileage rates.
A larger saving of around £527.04 would fuel nearly 5,000 miles worth of driving, enough to cover fuel costs for over 7 months based on typical annual mileage.
Scott Cargill added: “When you consider how many miles of driving you could fund with the savings of even a slightly lower interest rate, it puts into perspective that spending some time online or on the phone arranging finance at home before you head out to buy a car is worth it.
“After all, not many people would turn down thousands of miles of free fuel, but that’s effectively what they’re doing by not shopping around.”
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