People who are considering taking out a personal bank loan in order to finance the purchase of a new car should ensure they shop around to secure the best deal, they have been advised. According to AA Personal Loans, an increasing number of people are thinking about purchasing a new car this year, despite the fact that rising interest rates are impacting negatively on household finances and making loans more expensive.

Indeed, a survey has found that 33 per cent of drivers aim to buy a new vehicle in the next 12 months - up from the 26 per cent who made a similar admission this time last year. Moreover, 33 per cent of those considering the option of buying a new car in the next year would do so with the help of a personal loan.

Increasing interest rates appear to have reduced demand for used cars - with a 16 per cent decline in this area noted by researchers - although it seems that they have little impact on the new car market.

It is thought that improved reliability, lower running costs, greater comfort and reduced environmental impact are the main drivers of demand for new cars - and the fact this demand is showing no sign of abating even though financial conditions are less conducive to purchasing means it is especially vital that potential buyers search for the best possible deals.

The AA also revealed recently that the average car insurance premium in the UK rose to ?822 the second quarter of 2007. This will act to stretch consumers' finances even further, compounding the need to search for the most suitable personal bank loan product.

However, James Ketchell, a spokesperson for the Consumer Credit Counselling Service (CCCS), has urged people considering purchasing a new car using a bank loan to ensure they can meet the repayment schedule before they agree to the terms - and to understand that if their application is rejected, there is a reason for this.

"The first thing is if they are having difficulties, there is a reason that someone making an individual assessment of their situation has decided they might not be able to repay that money so I think then people have to question whether they actually can afford to take the debt out in the first place and then really see whether that is really needed or whether it is merely wishful and something that people want rather than something that they need," he commented.