man walks past cars for saleSavvy car buyers are turning to the web to find a good finance deal, instead of using dealer finance. Growth is soaring among high-risk and low-risk borrowers.

Finance specialists Car Loan 4U says has seen its car loan completions rise by 76% over the past 12 months and last quarter advanced more than £21.2m enabling just under 3,000 people to buy a car.

The biggest car loan the finance house has arranged is £60,000. The smallest loan is as little as a few hundred pounds.

The most popular selling makes are:
  • Vauxhall
  • Ford
  • BMW
  • Renault
  • Peugeot
  • Audi
  • VW
  • Citroen
  • Mercedes
  • Honda

In your prime?

Lending to prime customers – those with a good credit history - has increased by 147% year on year. Sub-prime lending – to people with credit problems or county court judgments against them - has grown by 75%.

But both sorts of drivers are spending about the same on a car. The average car loan taken out by prime customers over the past 12 months has been £7,081.08 compared with £6,714.86 taken out by customers with a sub-prime credit profile. But those average prices have fallen since the recession.

Online was always attractive to people with poor credit record because being refused a loan in a showroom could be embarrassing. The company reckons that a wider range of products online has led to a large proportion of consumers with a good credit history turning to the internet in order to research the best car finance deals available.

Recession hits prices

Car Loan 4U co-director, Ryan Dignan, told AOL Money: "As we work with a large panel of lenders, including many high-street names, we are able to offer finance that competes with what is available through traditional means.

"This trend is in line with the price-comparison behaviour that we already see in car insurance and traditional personal loan and mortgage products. We have noticed a drop in the average advance since the recession, suggesting that people are buying cheaper cars."

Poor credit history

Those with bad credit records can spend a fortune buying cars. Dignan explained: "Our rates vary between 5.9% and 28%, depending on the lender. All of the finance we arrange is Hire Purchase, so lenders have the added security of an asset on which to secure the finance.

"However like all lending bodies post-credit crunch, product availability is dependant on risk, which is typically assessed against the customer's credit, employment and address history. Our statistics indicate that we attract both the consumer looking for a headline rate and the consumer who perceives it difficult to get accepted.

"Each lender on our panel has their own criteria for acceptance. We do have certain lenders whose products are more suited to sub-prime customers in terms of criteria for acceptance. The higher risk for the lender is reflected in the rates available."

Growth expected

Dignan said: "Over the last three years, the demand for online car finance has grown exponentially, as savvy car buyers increasingly turn to online resources to research their next car and find the most competitive deal from a wider selection of lenders.

"Many car buyers find the convenience and anonymity of applying for car finance online more appealing than carrying out a finance application publicly in a dealership.

"We have seen our web traffic grow by 68% over the last 12 months, while trips to dealership showrooms per purchase have fallen from an average of five to six, to only 1.3.

"Automotive searches have also quadrupled over the past two years and customers are very well informed about the model choice, price and car finance options by the time they visit a dealership."