Car Scrappage Scheme Driving Up Personal Loan Applications

Mon, 26 Oct 2009

The number of personal loans taken out to fund car purchases has risen considerably since the introduction of the government’s vehicle scrappage scheme, it had been revealed.

According to Sainsburys Finance, an estimated £61.7 million was borrowed on personal loans for car purchases in each of the first three months of the scrappage scheme, compared with a monthly average of £44.7 million prior to its introduction in May.

The financial services provider also revealed that the average amount borrowed by car buyers was £7,515.

Steven Baillie, Head of Loans at Sainsbury’s Finance, said: "Since the Government’s scheme has been introduced we have seen a sharp spike in the number of loans people are taking out in order to buy a car, which is hopefully a good sign that the motor vehicle market is coming back to life."

"People considering buying a car, however, must remember to shop around for the best value loan they can find if this is how they decide to fund their vehicle – it can make a big difference to their repayments ."

Under the scrappage scheme, owners of cars and small vans registered before 31st August 1999 can trade them in at participating dealers in return for a £2,000 discount off the price of a brand new car or van.

Figures from The Society of Motor Manufacturers and Traders (SMMT) recently highlighted the success of the government scheme, revealing that the number of new cars registered in September rose by 11.3 per cent on the previous year to 367,929.

However, a spokesman for the comparison website Uswitch.com said: "Consumers should be cautious about taking out a loan unnecessarily and getting themselves into more debt ."
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