Car finance – Simple trick could save you £1,600, here’s how it works

Car finance is becoming increasingly more popular in the UK, with the prospect of owning a car somewhat less crucial to motorists now.

This could be due to the inherent costs of purchasing a vehicle, the increasing cost of ownership and a lack of necessity for a full-time motor.

In fact, predictions from experts at Auto Trader believed that within a decade all new motors will be bought on finance.

Being able to own a new car for a number of years at an affordable price and then switch it out for another new vehicle is appealing to many motorists.

However, as it becomes more popular and there is more competition it could be hard to know how much to spend or what loan to take out to allow you to sign up to one of these deals.

In addition to this, no motorist will want to be out of pocket from a leasing deal.

One way motorists can be a bit more savvy with their cars is by using a simple trick when taking out a loan, which could save them over £1,600.

Borrowing just £50 more for a new car loan can make it cheaper than taking out a smaller loan according to new research by What Car?.

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Over the course of a repayment period drivers could save themselves up to £1,600 by doing this, it has been reported.

The reason for this is that loans over £5,000 tend to have lower interest rates than those under £5,000.

For example, the repayment total of a £5000 loan from TSB over four years comes in around £1300 cheaper than the repayment of a £4950 loan over the same period.

Similarly, at Lloyds the repayment on a £7500 loan over four years is £1601 less than the repayment for borrowing £7450.

What Car? editor Steve Huntingford said: “We would always recommend borrowing as little as possible, but where the loan amount is close to the threshold for a lower interest rate, borrowing as little as £50 extra could save you 10 times that amount, so borrowers should do their homework.”

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