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Car buyers debt reaches £26.7bn

Debt amongst the UK’s 3.3 million car owners who have borrowed money for their purchase has topped £26.7bn, according to analysis by MoneyExpert.com.

Of this £12.8 billion is borrowed to buy new cars and £13.8 billion for second-hand motors.

Around 10% of the money is borrowed via hire purchase agreements while 40% is on loan from car makers or dealers with the rest taken out through personal loans, the financial comparison website says.

But MoneyExpert.com chief executive Sean Gardner warns many buyers will be paying too much for car finance by not shopping around for the best deal available. The cheapest deals could save a typical borrower more than £1,000 in interest.

The average size of a loan taken out through the different borrowing methods is shown below for both new and used cars.

Finance method Average borrowed for new car Average borrowed for used car
Personal loan £9,900 £6,200
Hire purchase agreement £13,100 £8,500
Car makers finance/credit £10,700 £6,800

Source: MORI Financial Services

Sean Gardner said: "Buying a car is one of the biggest financial commitments aside from buying a house and it should be entered into very carefully. Our figures show the average loan taken out can be as much as £13,000 and even for second-hand cars it can be between £6,200 and £8,500."

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