Second-Hand Market Still Most Attractive
Peter Sharples
OWNING a brand-new car is one of most people's big aims in life - but the real
driving force is in the second-hand car market.
An estimated five million used cars have changed hands in the last six months. More
than two thirds of the car-buying public are likely to go for a second-hand car and
the average loan they take out can be between £6,200 and £8,500.
Lloyd East, general manager of AA Financial Services says: "A car is probably
the second most expensive item people will buy after their home, so it's understandable
that, with the financial savings available, the second-hand market is the most buoyant."
One of the biggest worries for buyers of used cars, however, is reliability.
Until a couple of years ago a number of finance providers offered incentives such
as free inspections and reduced membership for breakdown cover on loans solely for
car purchases.
But many of these incentives disappeared as lenders reduced the rates of interest
borrowers could expect to pay.
However, AA research shows that most car buyers still worry about the reliability
of the car they have just bought - and whether they would be covered if something
went wrong.
"Such concerns often temper what should be an exciting purchase and can turn
joy into disappointment," says Mr East.
"This is especially true for those who buy a car from a private vendor or an
independent dealer where they have little comeback if it goes wrong."
AA Financial Services offers a free, six-month AA warranty to anyone buying their
car with an AA unsecured loan.
The AA's typical loan rates are 6.2 per cent for deals arranged by phone or 5.8 per
cent online.
"Only the AA offers this unique combination of a car warranty with a loan and
we believe it will help overcome many worrying car buying decisions," says Mr
East
The warranty applies on most car models up to 10-years-old and with up to 100,000
miles on the clock.
It covers mechanical and electrical breakdown for private motor vehicles including
engine, gearbox, clutch, axle, braking system, steering, suspension, fuel system,
cooling system and electrical system, up to a maximum of £1,000.
He said: "Over the past year we have seen providers remove specific incentives
such as free inspections and reduced membership for breakdown cover on loans solely
for car purchases. However, due to the increased competition in the personal loan
market at the moment, this loss of incentives is outweighed by a reduction in the
interest borrowers will pay." With loan rates now as low as 5.8 per cent, this
leaves consumers in a great position to shop around for the deal that suits them
best in replacing those incentives with the spare cash, or simply to spend the money
on something completely different.
