Survey reveals car finance cost gaps

A new survey by the Financial Regulator reveals people can save almost €500 and more than €1,000 on two different car finance agreements.

The survey features two profiles of consumers shopping around for car finance:

1. "Claire is upgrading to a bigger car. She plans to trade in her old car worth €3,000 for a 2006 Landrover Freelander Jeep worth €35,000. She will use €10,000 of her SSIA money to put towards the cost of the car, so the total cost of the finance is €22,000, which she will pay back over five years. The cost of the finance ranges from €4,290 to €5,300 - a difference of over €1,000.

2. "Noel is buying a 2003 Ford Focus costing €13,000 and needs finance for the full cost of the car, which he will pay back over three years. The overall cost of the finance ranges from €1,582 to €2,079, showing a saving of almost €500.

Head of consumer information Sharon Donnery said: "This cost survey shows the money consumers can save by shopping around for car finance. It also highlights some issues to be aware of before buying car finance, such as what happens if you want to end a hire purchase agreement early."

She added: "Some of the finance agreements in the survey are only available through car dealers while most are available directly from the finance house. When you buy car finance through a car dealer, make sure you know what sort of agreement it is.

"The main difference between hire purchase, which is often called finance, and a car loan, which you can also get through a garage, is that with hire purchase, you do not own the car until you make the last payment.

The survey also shows the cost of payment protection insurance, which covers all or some repayments if you get certain illnesses or are made redundant. The cost of this insurance could add between €31 and €69 a month to repayments on a €13,000 agreement and between €36 and €76 on a €22,000 agreement.

Not all policies give the same level of cover. The regulator warned today that drivers do not have to take this cover and you should consider carefully whether you need it and how much you are prepared to pay for it.

Copies of the car finance cost survey are available by phoning the consumer help-line on lo-call 1890 77 77 77, by visiting www.itsyourmoney. or by calling into the Consumer Information Centre at College Green, Dublin 2.