The cost of buying a new car can increase by a quarter if you choose to take out the wrong type of finance, a new report claims.

A study from comparison site Moneyfacts reveals that the difference in cost between the best and worst car finance deal is an astonishing 26 per cent - meaning that anybody who fails to research their finance options properly could end up making a "costly mistake".

"Before opting for the convenience of forecourt finance, it's worth checking out how this compares with other deals on the market," Samantha Owens, head of personal finance at Moneyfacts.co.uk, commented.

"There are over 50 providers offering a range of unsecured loans and plenty of options available to borrowers. But with such a wide range of choice, comes a wide range of rates and deal types.

"Latest Moneyfacts.co.uk research has shown that, on a £5,000 loan, the difference between choosing the best and worst loan deal could cost you an extra £861, while the wrong choice on a £10,000 loan could see you out of pocket by more than £2,600 - or to put it another way, increases the cost of financing your car by a massive 26 per cent."

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