The best route to a finance bargain for new car buyers: Maria Scott helps an L-reg hopeful through the maze of deals and discounts

PEOPLE wanting to buy a new L registration car next month may find that dealers drive a hard bargain.

The motor industry is in buoyant mood and less inclined this year to offer big discounts and interest-free finance. Manufacturers and dealers think sales could reach 400,000 next month, compared with 373,000 last August.

However, discounts are not out of the question and buyers face a confusing array of finance deals and special loan rates.

Janet Goldsmith, a credit controller from Hertfordshire, wants to replace her three-year-old Vauxhall Nova with a new Vauxhall Corsa. Is it better, she wonders, to arrange a personal loan and haggle for a discount as a cash buyer? Or should she go for a dealer's finance package?

A personal loan will usually work out as the next best thing to pure cash. But loans offered by manufacturers and dealers may suit some people.

Manufacturers, including Ford and Vauxhall, are promoting a new type of lending scheme that aims to offer low monthly payments. The buyer puts down a deposit and borrows part of the price. To buy outright they normally have to pay a further lump sum.

These schemes aim to encourage people to buy another car from the same manufacturer, so the borrower is usually offered the chance to trade in at a guaranteed price at the end of the contract term. Another option is to forfeit the car, at no penalty.

Like hire purchase deals, these schemes usually require a deposit, of perhaps 20 per cent, and there may be hefty penalties for backing out early.

Ms Goldsmith has a G-registration Nova, a limited edition Sting model. This has 53,000 miles on the clock and she hopes to trade it in. Vauxhall's official, on-the-road price, for a new 1.4LS, three-door Corsa is pounds 7,998. Motorbodies, a Vauxhall dealer in Luton, quoted a price of pounds 7,800. The firm would pay Ms Goldsmith a pounds 3,000 trade-in price for her Nova. Using this for her deposit, she will pay pounds 62.87 a month for three years on Vauxhall's hire-cum-buy deal, called Choices 1-2-3, with a pounds 3,633 lump sum to pay at the end. The total cost would be just under pounds 8,896. But the cost of Choices depends partly on annual mileage and this quote assumed just 10,000 miles a year.

Lex Vauxhall, also in Luton, quoted a cash price of pounds 7,700, after a pounds 355 discount. This dealer could offer a conventional hire purchase deal costing pounds 201.66 a month, and assuming a pounds 2,000 part exchange price for the Nova, as a deposit. The total cost of the car would be pounds 9,260.

Under the Choices scheme, assuming mileage of 18,000 a year, Ms Goldsmith would pay pounds 137.35 a month, after a pounds 2,000 part-exchange. The lump sum payment at the end of the term would be pounds 3,243, making a total of pounds 10,188.

She would almost certainly get a better price for her Nova by selling privately so it would be worth thinking seriously about a part-cash, part personal loan arrangement.

She does not like haggling over prices but one way around this is to buy from a car broker. Brokers negotiate discounts with dealers and are paid commission by them.

Quote to Quote said it could offer Ms Goldsmith the new Corsa at an on-the-road price of pounds 7,390. If she can find a deposit of pounds 3,400, financed mainly from the sale of her Nova, she would only need to borrow pounds 4,000. Marks & Spencer would charge pounds 141.11 a month over three years for this amount or pounds 196.67 over two, excluding payment protection insurance. Taking this route her car would cost a total pounds 8,480 with a three-year loan or pounds 8,120 with a two-year one. And she would own it outright from the start.

A word of warning about car brokers, though. Choose one that has been in business some time and be wary of those asking for large deposits.

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