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Fixed loan rates edging upwards

The direct loan companies have been quietly adjusting their rates as they gear up for the big sales push on car loans through September and October.

The plan is to have rates in place now which they can stick with and promote in the vital two or three-month period during which customers are thinking about changing their car.

Despite the Bank of England keeping the base rate at 6%, fixed loan rates are edging upwards. This is because competition in the market place has held them artificially low for several months now and because the longer term prospects are still for a base rate rise by the end of the year.

Alliance & Leicester, one of the biggest players in the market, has moved its headline, advertised rate up from 8.9% to 9.8% for loans of £15,000. This brings its loan rates roughly in line with its PCP-style finance, Car Purchase Plan.

However, unlike manufacturer and motor finance company based PCPs, Alliance & Leicester does not offer customers a guaranteed final value - a major weakness in these days of falling residual values.

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