With the release of the new 08 registration upon us, many car buyers will use dealer finance to fund their new purchase.

According to price comparison website uSwitch.com consumers will buy an estimated 224,000 cars using dealer finance but actually waste £1,094 on interest payments . The total amount of extra money spent will amount to an estimated £174m on dealer finance. A cheaper alternative would be a low-rate personal loan .

According to the company on average car dealer finance costs 9.88 per cent APR which is 3 per cent more than competitive unsecured loan deals.

Mike Naylor, personal finance at uSwitch.com said, Finding a competitive loan and having the money ready to buy the car immediately will not only ensure that people get cheaper finance but it also gives them more bargaining power to get the best purchase price.

Just because a car dealer can offer you a good deal on a new car, it doesn’t always mean that they will offer the best deal to finance it.

However, Toby Clark, senior finance analyst at Mintel, the consumer market research company commented that cheap personal loan rates could be out of most car buyer’s reach because of late payments and defaults .