Borrowing just £50 more for a new car loan could save you more than £1,000 compared with a smaller loan, according to research by motoring consumer experts.
Analysis of some of the UK’s leading high street lenders suggests that borrowing the extra amount could save motorists between £175 and £1,600 over the course of a four-year repayment period.
And with research showing an eight per cent rise in car finance lending – to more than £10 billion – in the first half of 2018, there is scope for drivers to be saving themselves substantial amounts of cash.
Borrow more, pay less
According to the study by What Car? magazine, loans of £5,000 and above typically have lower interest rates than smaller loans. For example, the repayment total of a £5,000 loan from TSB over four years comes in around £1,300 cheaper than the repayment of a £4,950 loan over the same period.
The pattern is repeated at six more of the country’s biggest banks, with a massive £1,601 difference found between loans of £7,450 and £7,500 at Lloyds.
However, there is a cut-off point where bigger loans cease to offer better value. The study showed that above the £8,000 threshold loans would cost the customer more the more they borrow.
Loan repayment figures from leading UK high-street lenders
Do your homework
What Car? editor Steve Huntingford said: “We would always recommend borrowing as little as possible, but where the loan amount is close to the threshold for a lower interest rate, borrowing as little as £50 extra could save you 10 times that amount, so borrowers should do their homework.”
Car finance top tips
Shop around – compare the types of finance available and choose the best option available to you
Don’t stretch yourself – only borrow within your means, making sure you can afford the repayments
Additional charges – be aware of additional charges and always read the small print of your loan to be sure you don’t end up with any nasty surprises