Buying new and used cars on finance is growing more popular, according to a new report from the Finance and Leasing Association.
Figures have revealed that the number of new and used cars sold on finance in January was more than 6 % and 20 % higher respectively, than a year ago.
In order to help motorists buy affordable new and used cars, many dealers were offering low and zero percent finance deals on cars in January, thereby reducing the impact of the VAT rise.
However, drivers should not forget to include car insurance costs when assessing their budget for buying a new car.
Dealer finance is the most popular way to purchase a new car, with 53% of buyers choosing this option within the last 12 months.
Commenting on January's motor finance figures, Paul Harrison, Head of Motor Finance, said: "New and used car finance sales in January exceeded market expectations. In addition to the flexibility offered by dealer finance, there were good, low-interest rate deals available which contributed to the unexpected growth.
"More and more customers are turning to personal contract purchase agreements because of the flexibility this provides. Customers do not have to commit to buying the vehicle outright if they do not want to and can hand the keys back and walk away once all payments have been made. PCP deals accounted for 60 per cent of the credit advanced for new cars in 2010."
© Press Association 2011