'Drivers spending loans on gas guzzlers'

Despite growing concern about the environment, motorists are spending their personal loans on 'gas guzzling' cars rather than greener models, according to new research.



Taking out a personal loan is one of the most popular ways to fund a car purchase, but only two per cent of motorists are planning for their next car to be an environmentally-friendly hybrid vehicle, which combines a petrol and an electric engine.

Toyota's petrol and electric hybrid, the Prius, is among the best known of these and was named Europe's Car of the Year in 2005.

Meanwhile, just three per cent of drivers are planning to choose their next car on the basis of its green credentials or low emissions, the survey from Alliance & Leicester Personal Loans revealed.

In addition to selecting less environmentally-friendly cars which are more heavily taxed, millions of drivers are wasting over £3,000 by taking out expensive loans from car dealerships, the bank claimed, with 26 per cent of those borrowing money to buy a car doing so from a dealership.

Richard Al-Dabbagh, senior loans manager at Alliance & Leicester, said: "Some car finance deals are well into double figures, and should be given a wide berth.

"With pricey finance being sold to you where you can find yourself overpaying by over £3,000 or more, it is worth spending ten minutes looking around for a good deal before heading into the dealership."

Drivers 'rushing in to car finance deals'

The range of financing options available when buying a new car mean that many drivers are rushing into the first deal they are offered, a new study claims.

Finance site MoneyExtra.com said that while one form of forecourt finance, hire purchase (HP), was extremely convenient as it was commonly offered by car dealerships, it had its drawbacks.

The loan is secured against the car and the car is not owned until the final payment has been made, the site warned, while average APRs for HPs are in double digits and there can be severe implications if payments are not made.

It added that another option offered by forecourts was personal contract purchase (PCP), which usually offers lower monthly payments than HP by deferring a chunk of the car's value to the end of the term.

Many drivers overlook the option to take out a personal loan to fund a car purchase, Moneyextra.com said, with typical APRs among more competitive loans at 6.3 per cent to 7.9 per cent, presenting "significant savings" in interest.

"By taking the time to arrange finance before visiting the forecourt, motorists can be sure that they will enjoy every mile in their new car and be certain that they are getting more metal for their money," said Robin Amlot, senior editor at Moneyextra.

Switching service uSwitch estimated last month that Britons were set to waste a collective £228 million on uncompetitive credit deals on cars with the new 2007 number plates this March.

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