Alliance & Leicester triggered a mini-price war when it aggressively cut rates for its car loan products in late August. Although Tesco continues to offer the lowest headline rate in the market, A&L is a major player in car loans and has marginally better rates across the most popular loan amounts.

The RAC was among the first to respond but still reserves its most competitive rates for RAC members. Direct Line has also moved down and now offers 9.9% APR across a broad range (£5,000 to £15,000).

The direct lenders are increasingly adding value to their loan products, often in the form of cheaper insurance but also with peace-of-mind products. The RAC loans are provided by Halifax but the organisation is also able to offer free membership and, through Lex Autocentres, a free 14-point car check on any vehicle bought.

While direct lenders have been quick to react to interest rate cuts, banks are proving much slower. Abbey National is still quoting personal loan rates that were set back in April. HSBC has just upped its rate for a £2,000 loan having run a cut-price offer over July and August.

HIGH STREET LENDERS (36-MONTH LOANS)
Loan Amount Lender APR Monthly Repayment
with PPP		 Monthly Repayment
Without PPP
£2,000 A&L 17.0% £79.07 £70.10
Direct Line 14.9%% £76.87 £68.30
Egg 16.5% £79.47 £69.73
RAC 16.9% £82.38 £70.04
Tesco 15.3% £76.81 £68.70
£5,000 A&L 9.0% £176.33 £158.27
Direct Line 9.9% £178.97 £160.13
Egg 10.7% £184.53 £161.91
RAC 10.2% £186.76 £160.76
Tesco 9.1% £175.52 £158.30
£10,000 A&L 9.0% £352.66 £316.54
Direct Line 9.9% £357.94 £320.27
Egg 9.9% £365.15 £320.39
RAC 10.9% £373.52 £321.53
Tesco 9.3% £352.04 £317.44
£15,000 A&L 8.7% £526.59 £472.88
Direct Line 9.9% £536.91 £480.41
Egg 9.9% £547.73 £480.59
RAC 9.9% £557.72 £480.35
Tesco 7.9% £517.43 £467.41
Source: Automotive Management