Half of car finance users focus on monthly repayments rather than the total cost of their agreement, according to a new study by Compare the Market, raising the risk of paying more in the long run.
The comparison site's research found that 50% of the 2,000 car finance users polled admitted they concentrated more on repayment figures than on total fees. Almost half (47%) compared monthly payments when choosing finance, compared with 32% who compared APR and 29% who compared the total amount repayable.
Experts warn of 'tunnel vision'
Charlie Evans, Money Expert at Compare the Market, said: "When you're working out whether you can afford a new car, it is natural to focus on the amount you will need to find each month. It is an easy figure to understand and to compare against the rest of your household budget."
He added: "But the cheapest-looking monthly payment does not always mean the cheapest deal overall. A lower monthly repayment can sometimes come with a longer agreement, meaning the overall amount paid could be higher. Our research suggests some motorists may be experiencing a degree of 'monthly payment tunnel vision'. Far more people are comparing the monthly repayment than looking at the APR or the total amount they will eventually pay."
Few prioritise overall cost
Just 12% of those surveyed said they would prioritise the overall cost of a policy instead of repayment fees, meaning motorists are around four times as likely to prioritise the monthly figure. The poll also found that one in three (33%) road users did not compare more finance options because their monthly payment was already affordable.
However, drivers might come to regret their decision, with 58% believing they definitely or probably could have secured a better deal by comparing more finance options.
Advice for motorists
Evans said: "With the cost of living where it is, it is understandable that many motorists focus on the monthly payment. Finding a monthly payment that fits your budget is important, but it's important for motorists to also look beyond that figure before signing an agreement."
He advised: "Looking at the APR, total amount repayable, agreement length and any additional fees alongside the monthly cost can give a much fuller picture of what the finance will actually cost. It is also worth comparing different options as there may be a more affordable monthly payment available. Taking a little more time to shop around could help motorists find finance that works for both their monthly budget and their overall finances."
