Currently reading: Third of UK motorists face maximum APR on finance purchases
Nearly 1.5m Brits may be deterred from buying a new car thanks to interest rates of over 30% following poor credit scores

Around 1.4 million Brits may be deterred from purchasing a new car through finance this year due to poor credit scores forcing high interest rates.

According to research conducted by credit check company Clearscore, around a third of Brits have poor credit scores and would therefore be offered the highest annual percentage rates (APR) on finance car purchases.

For example, someone with a poor credit rating looking to buy a 2017 Land Rover Discovery, which costs from £43,495, would likely be faced with a five year finance deal commanding 31.6% APR, following a 10% deposit.

UK car production surpasses 1.6 million in 2016

After the five year term the buyer would have spent £40,672.57 in interest alone, or 94% of the car's overall value. A high credit score person faced with 5.9% APR would have paid just £7,775.66 in the same period, which represents just 18% of the car's value.

The same scenario on a £100,000 car would leave a poor credit score buyer paying £93,796.73 after five years. A high credit score buyer would pay less than £18k.

“We estimate that 33% of people fit into this lowest band,” a Clearscore spokesman told Autocar. “Given that 80% of cars are bought with car finance of some sort, we estimate that this issue effects around 1.4 million people.”

The winners and losers in 2016's UK car market

Conversely, research shows that just 22% of people have an excellent credit score and would therefore be offered the lowest APR.

Justin Basini, Clearscore CEO added: “Car finance deals are more popular than ever and can be a great way to make your dream car affordable. One way to improve the deal you’re offered is to choose the car you want a few months in advance and work hard on improving your credit score before applying for finance – a high score can reduce the cost significantly.”

UK car sales reached their highest on record in 2016, largely thanks to attractive finance. That trend is expected to stall in 2017, however, thanks to the reduced value of the pound and economic uncertainty.

Read more:

UK car sales figures skewed by retailer self-registrations, says insider

Growing PCP sales lead to reduced used car values

Advertisement

Latest business news

Fiat Scudo Ellesmere Port
Stellantis builds vans in Luton and Cheshire, which Tavares says should count towards its ZEV quota
Stellantis CEO: Terrible ZEV mandate will kill UK car industry
Mini Oxford production line
Oxford will produce only combustion-engined versions of the new Mini Cooper until 2026
UK car production falls amid several model changeovers
1.Ford Otosan Yeniköy drone
Last year Ford Otosan made a profit of the equivalent of £1.1 billion
Inside Ford’s Turkish goldmine: home of the Transit

Join the debate

Comments
7
Add a comment…
405line 19 January 2017

Is this a sponsored article?

Sponsered by motoring finance companies for people needing to borrow money in order to buy a new car that will loose them more money than the interest rate saving.
Venturi288 18 January 2017

Read: "Third of UK motorists

Read: "Third of UK motorists have terrible finances"
stumpys182 18 January 2017

Excellent credit score does

Excellent credit score does NOT guarantee the lowest rates. With the FCA's mantra of 'Treating Customers Fairly' or 'TCF' as its referred to in the FCA bumph, it should mean that EVERYONE gets the same rate, but its not the case. Lenders don't lend out of the goodness of their hearts, they lend to make money....lots of it! If someone with an excellent credit score is presented to some lenders, they will take the view that the customer has attained that great score, by always paying on time, or, more often that not, settling up early. If someone settles early, they wont be paying interest over the whole of the intended term and therefore reduces the income for the lender. So in some cases, the lender will actually apply a higher rate, in order to maximise their income over a shorter term should the customer settle early. If the FCA really are serious about TCF, then how can it allow 'sub prime' lenders to increase rates to those with apparent credit difficulties? Surely if someone got into trouble, it was because they couldn't afford it in the first place (not in every case obviously) so how can it be fair to allow them to borrow more money, then whack the rate up even more, increasing the risk that they will get in even more financial difficulty? It is fairer NOT to lend them any more money than to potentially force them into even more difficulty. Isnt this how we got into the credit crisis in the first place?
This is not meant to be a lecture to anyone who cant afford to buy things without finance, indeed, I think most of us will have bitten off more than we could comfortably chew on occasions and it is not right to tar everyone with the 'wilfull disregard of affordabilty' brush, so please do not take this out of context, I do not wish to offend anyone!