It seems that the sunnier weather has got everyone in the mood to flash the cash, with car buying season in full swing. In fact, according to research from Sainsbury's Bank some 23% of adults surveyed are considering buying a car in the next six months, and that means it's time to get your finances sorted.
The Sainsbury's Bank car buying index has shown a steady increase in the number of consumers considering buying new cars over the last two years, with a rise of 5% being recorded over the previous six-month period alone. This would indicate that confidence is slowly returning to household finances as people are becoming more inclined to make expensive purchases, and this is backed up by figures from the Society of Motor Manufacturers and Traders (SMMT) which showed that car registrations rose by 17.7% in March 2014.
It seems that people have got more money to spend on a new car too – of those considering making a purchase, the average expected outlay is £12,506, a rise of 26% compared to the previous six-month period. Even those looking to buy second-hand cars are expecting to spend more than they did previously, posting an increase of 9.9% to make the average spend £5,984.
However, it doesn't mean that all those purchases will be in cash. Around 38% of those planning to buy a car will turn to loans or other finance agreements to pay for at least part of the vehicle, including hire purchase contracts, credit cards and unsecured personal loans.
Arguably, it's a great time to consider this form of funding. Personal loan rates have been falling fast and are now at record low levels, particularly for mid-tier borrowing – between £7,500 and £15,000, with the best rates being from just 4.4% APR – so if you haven't got a suitable amount saved then turning to an unsecured personal loan could be an affordable solution.
Simon Ranson of Sainsbury's Bank said: "Whether you are buying a new or second-hand car, it's worth considering and investigating all payment options available as it could make a significant difference to the monthly repayments and total price you will pay for the car. As well as a personal loan offering more competitive rates than other forms of finance, a loan provides the consumer with cash and when it comes to car showrooms, cash buyers can often command greater bargaining power with dealers."
It could be an ideal solution for a lot of car-buyers, and although other forms of borrowing will attract higher interest rates they could still be considered depending on your circumstances. But, remember that the more you've got to put down as a deposit the less you'll have to take on as credit, so setting up a savings account solely as a car fund could be ideal.
Once you've got your basic finances sorted you'll want to turn to that other vital consideration – car insurance. Getting a suitable policy not only means you'll be totally prepared for any eventuality but if you do your research you could find a great deal too, keeping your monthly costs to a minimum and your finances in order. So, will you be taking the plunge this car buying season?
Compare loan repayments on a car with our easy-to-use loan calculator
Compare savings accounts to set up a car fund
Find the best car insurance deal and see how much you could save
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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