With 400,000 car purchases set to take place this month, consumers are being warned they could be losing out on thousands of pounds by choosing an uncompetitive finance deal for their new motor.

According to Moneyextra, many Britons choose a hire purchase agreement offered by car dealerships, instead of applying for a cheap personal loan.

However, the financial firm warned that using showroom finance, despite its convenience, can see consumers racked with massive amounts of interest.

Senior editor at Moneyextra Robin Amlot said: "By taking the time to arrange finance before visiting the forecourt, motorists can be sure that they will enjoy every mile in their new car and be certain that they are getting more metal for their money."

He claimed that motorists could be advised to take out a personal loan to fund purchasing a car as they often have lower interest rates.

Mr Amlot added that opting for a cheap personal loan can also help consumers be in a better position to "strike a deal" on the car they want.

Research by Alliance & Leicester claimed motorists are wasting an average of £3,000 on car purchases by opting for showroom finance deals instead of a personal loan.