Approximately 1.4 million British may be deterred from purchasing a new car through finance this year, due to poor credit scores by forcing the high interest rates.
According to research conducted by credit check company Clearscore, about a third of the British have scores of poor credit, and would therefore be offered the highest annual percentage rates (APR) to finance car purchases.
For example, someone with a poor credit rating looking to buy a 2017 Land Rover Discovery, which costs from £ 43,495, it would probably be in front of a of five years to finance the deal, commander, and 31.6% in APRIL, following a 10% deposit.
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After five years of the mandate, the buyer would have spent £40,672.57 interest-only, or 94% of the cars total value. A high credit score person faced with the 5.9% APR would have only paid £7,775.66 in the same period, which represents just 18% of the value of the car.
The same scenario on a £ 100,000 car should have left a poor credit score buyer to pay £93,796.73 after five years. A high credit score buyer should pay less than £18k.
“It is estimated that 33% of the people who fall into this lower band”, a Clearscore spokesman has told Autocar. “Given that 80% of the cars are bought with a car finance of some kind, it is estimated that this problem effects approximately 1.4 million people.”
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On the contrary, the research shows that only 22% of people have a excellent credit score and would therefore be offered the lowest APR.
Justin Basini, Clearscore chief executive officer added: “Car finance deals are more popular than ever and can be a great way to make your dream car at affordable prices. A way to improve the deal you are offered is to choose the car you want for a couple of months in advance, and work hard to improve your credit score before applying for finance – a high score can reduce the cost significantly.”
UK car sales have reached their highest on record in 2016, thanks in large part to the attractive financing. The trend is not expected to stall in 2017, however, due to the reduction in the value of sterling and the uncertain economic climate.
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