Cheap loans best for car finance

Britons are set to spend billions on new cars over the next six months, and cheap loans could be the best way of financing this.

New figures from Sainsbury’s Bank show 7.65 million people intend to buy a car between March 2007 and August this year, and 26 per cent of them plan to fund part of this purchase with a cheap loan.

"Our findings estimate that of the total amount of money that will be spent on buying vehicles, around 15.8 per cent will be financed through personal loans, which equates to around £8.41 billion," said Steven Baillie, Sainsbury’s Bank loans manager.

"Although this represents a 33 per cent drop in the total planned for car purchase loans, it's actually more important than ever for people to shop around due to heightened competition in the market."

Overall the Sainsbury's Bank survey shows 430,000 fewer people are planning to buy a car in the next six months than in the last six months, spending £16.2 billion less.

"For the first time in two years, we have seen a fall in the total anticipated spend on new cars," Mr Baillie said.

"Over the past four years since we started the car buying index, we’ve seen occasional dips in planned spend on cars, but this fall by £16.2 billion represents by far the biggest drop we’ve witnessed to date.

"It is difficult to say exactly what is fuelling the decrease in anticipated spend on new cars and it could be a mixture of factors, including concerns about interest rates and environmental anxieties."