A new investigation from Admiral Car Finance has revealed a range of hidden and unexpected costs consumers could unwittingly be hit with when purchasing their next car on finance, which could see them spending almost £1,200 more than they need to.
With 2.4 million people spending a total of £37.6 billion on car finance last year, consumers are spending an average of £15,500 each on car finance, but Admiral has warned drivers could find themselves with a bigger bill if they fall victim to additional upfront and end of contract charges they weren’t expecting.
Reviewing dealership finance agreements and charges when returning a vehicle at the end of the contract, Admiral found that failing to shop around for finance, being charged for using third party finance, administration fees and over mileage charges could collectively add up to almost £1,200.
To help consumers avoid getting stung, the car finance provider has laid bare the charges and shared its top tips to help motorists stay on budget when it comes to paying for their car.
Not shopping around
After paying a mortgage or rent, for many people a car is the second largest financial commitment they make each month. But one of the biggest ‘hidden’ costs of buying a vehicle on finance can be the simple mistake of failing to shop around for a finance provider - and the potential savings are considerable.
Comparing costs from 10 different providers’ finance deals based on equally priced cars, Admiral found an average APR of 11.8% compared with its own offering of representative 7.9% APR, meaning buyers could save on average £736 simply by arranging the finance for their car before heading to the garage.
In some cases, this savings figure could jump to £2,136 based on an APR of 13.9% - the highest rate found as part of the investigation.
Admiral also revealed that saving just 1% on the cost of HP car finance (by paying 11% instead of 12% APR) could save drivers around £190 over four years, enough to cover the cost of 1,724 miles worth of petrol.