AA Personal Loans has recommended that people looking to buy a car on finance should shop around for the best deal.

According to the AA Deals on Wheels report, one in three people who buy a car in the next year will do so using a loan.

Higher interest rates have made this a more expensive option, which may be reflected in a 16 per cent decline in demand for used cars since the start of the year.

However, factors such as reliability, running costs, comfort and green concerns have driven demand for brand new cars. Almost a third (33 per cent) of drivers aim to buy a newly registered vehicle over the next year, compared to 26 per cent last year.

"As interest rates rise, UK consumers are beginning to tighten their purse strings. But our research shows strong consumer demand for new registration cars ahead of September 1st," said AA's head of personal loans Lloyd East.

Last week, car insurance provider esure advised car lovers awaiting the arrival of the forthcoming 57 registration plate that the best cover deals might be found online.