Drivers 'avoid debt' to buy a new car

Publication date | 02/07/2009

Buying a new car may be on the shopping list of many Britons because of the £2,000 incentive offered by the government's car scrappage scheme.

The AA claimed that this initiative has led to many people to consider buying a new car, when normally they would only purchase second-hand vehicles.

Mark Huggins, director of AA Savings, said since the scheme was launched in May there have been 15,000 orders per week for new cars.

A recent AA/Populus poll found that 47 per cent of car owners intending to buy a new vehicle over the coming months will fully or partly cover the costs of doing so by dipping into their savings, rather than getting into debt.

Commenting on the statistic, Mr Huggins asserted that many households may not be willing to take on new debt during a recession. Instead, Britons would rather cut down on luxuries to try and save cash to put towards a new car.

"Families who can avoid using finance to buy into the scheme become the real economic winners," he stated.

"With interest rates improving, now is certainly a good time to get back into the habit of saving," Mr Huggins added.

Not all households will have money put to one side because of other financial commitments, such as mortgages, personal loans and credit card bills.

But the introduction of the car scrappage scheme could have led many Britons to address how to raise the rest of the money to buy a new car without getting into further debt.

Many older drivers, whose children may have now left home, may also want to treat themselves to a top-of-the-range vehicle to enjoy during their retirement.

People who have already considered surrendering an underperforming endowment policy to obtain some extra money may not realise that selling on the secondary market is an option.

An aap spokesperson said that the firm - which is the UK's biggest buyer of endowments - will always pay more for a policy than the surrender value, should it make an offer to buy it.

Furthermore, he stated that some of aap's customers had sold an unwanted endowment policy to raise money for lifestyle purchases, which may include a more expensive car.

The British Insurance Brokers' Association has recently urged motorists not to cut corners on their car insurance. Drivers were also avoid to keep on top of their vehicle maintenance.