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

Join the debate

Comments
7

18 January 2017
Change "Around 1.4 million Brits may be deterred from purchasing a new car" to "Around 1.4 million Brits may be deterred from purchasing a new car they can't afford one at present".

 

Hydrogen cars just went POP

18 January 2017
......just change the title to "33% (at least) of people are living beyond their means just to fuel their materialistic desires". No sympathy.

18 January 2017
Only a fool would take a loan to live beyond their means at 30%+ APR. But what annoys me more is I'll be paying more on my low loan (3%APR)than I need to, to cover the idiots that default!

 

 

 

18 January 2017
How is someone with poor credit going to go into a showroom and finance a brand new £40k or £100k car??

I had poor credit years ago (naive student finances) and made do rightly with £1000 bangers. Even now with a great score, mortgage etc. I would baulk at financing anything more than a £10k used car.

18 January 2017
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!

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

19 January 2017
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.

Add your comment

Log in or register to post comments

Find an Autocar car review

Driven this week

  • Citroën C3 Aircross
    First Drive
    17 October 2017
    The Citroen C3 Aircross has got funky looks and a charming interior, but it's another small SUV, and another dynamic miss. Numb steering is just one thing keeping it from class best
  • Skoda-Karoq 2.0 TDI 4x4
    First Drive
    16 October 2017
    Diesel version of Skoda’s junior SUV is unobtrusive and undemanding, but we’d still go for the silkier petrol version of the Karoq
  • Audi Q7 e-tron
    First Drive
    16 October 2017
    Expensive and flawed but this understated diesel-electric Audi Q7 has a lot to offer
  • Citroën C3
    First Drive
    16 October 2017
    Is the third gen Citroën C3 ‘fresh and different’ enough to take on its supermini rivals? We spend six months with one to find out
  • BMW X3
    First Drive
    15 October 2017
    A satisfying rework of the X3 that usefully improves its handling, cabin finish, space and connectivity to make this BMW a class front-runner again