A Few Handy Tips On How To Buy A Car
Time to get a new car, or even your first ever car, is it? Well as you may or may not know already, the business of buying a car can be one which is filled with a great deal of apprehension, nervousness, and uncertainty the first few times you do it.
And with the sheer amount of money that’s at stake, both when you hand the money over to pay for your car and over the course of its lifetime, means that it’s pretty important to try and get it right first-time.
That’s where this article comes in – we’ve come up with some handy tips to help make the process of purchasing your car easier and more affordable. We’d still recommend doing your homework online, in addition to reading this article – experts like Which? and Autocar are a good place to start, and will provide you with some fantastic insider advice.
What do you want your car for? What are your needs? Choosing the right car
There’s a very strong chance that our words of caution on this front will fall on deaf ears. The urge to buy a car which, for want of a better word, is an absolute weapon will be overwhelming. However do try and curb your wild, irrational enthusiasm for that Audi or Mini Cooper which you love, love, LOVE for just a moment – aside from the small question of whether you can actually afford such a vehicle in the first place, there’s also the question of does it actually tie in with what you need from an everyday car?
If you are settled into a life of settled domestic bliss, complete with children to take to school and dogs to take on country walks, a hatchback or even a saloon is unlikely to suit your needs – an estate with plenty of space, or a people carrier, on the other hand, would be much better suited to such practicalities. Or instead, maybe you just need a cheap, zippy little motor for you and your mates to drive around town in, like a Corsa or a Fiesta? That, or you simply want something a bit sexy to drive – a car which is only fitting for someone as hot and upwardly mobile as you are. In this instance you’ll want a slick, sporty newer model with the right name on the badge.
In short, think about your lifestyle, what you’re going to use your car for, and pick accordingly.
Do your research: read up on performance & safety reviews of suitable cars, and find out what you can get for your money
Right, so now you’ve figured out what you need from your soon-to-be car, lifestyle-wise, it’s time to brush-up on what cars come highly recommended, and to find out what you can actually get and for how much. As a word of warning, this is likely going to be a sobering experience if you’ve been a bit dreamy about what you’ve imagined yourself driving – try not to be too down-hearted if you find that the kind of car you’ve set your heart on is out of financial reach.
As always when you’ve got a bit of homework to do, the internet is your friend. Websites like What Car?, Autocar, Autotrader, and Which? are great places to start your research, and will offer a huge amount of useful and reliable information. There will be plenty of reviews on every car, model and make you can think of, along with comparison tests between them – this will be handy in helping you to find the safest and most reliable car for your money.
Importantly, you’ll also be able to find out what you’ll be looking to pay for the cars you’re potentially interested in buying. Just remember that in addition to thinking about the cost of buying your new or used car, you’ll also need consider other expenses such as road tax, insurance, and servicing costs too. But we’ll talk more about this later.
How are you going to pay for it? Savings or credit?
The first option for funding your soon-to-be car purchase is simple: save up and then buy. Simples. However unless you’re in the position where you’re either a high-earner or have a family member bankrolling you, in all probability you won’t have the spending power to buy anything except a low-cost older model with a few miles on the clock. And as you may or may not know, cars with a high mileage run the risk of being a high maintenance money trap, which could end up costing you dearly in the long run. With this in mind, it might be worth looking at your credit options first.
There are a vast number of credit options out there which you can use to purchase a car. Aside from the obvious route of taking out a loan to cover the cost of a car purchase, you’ll also have the option of paying for your new car with a car finance package, should you choose to buy your through a new or used car dealership. There are a number of different car finance packages that dealerships will make available to you, including a Hire Purchase Agreement, Personal Contract Plan, Leasing, and 0% Finance package, all of which have their own individual pro’s and con’s – you can find out more about each of these options.
Ultimately, though, your credit rating will determine how much you’re able to borrow and at what interest rates – aka how much you’ll pay for the privilege of borrowing. If your credit rating is healthy, happy days! Credit will be easy to come by, whether it’s a loan through your bank or a low-cost, low-interest car finance package from a dealership, or any other source of borrowing. However you may struggle a bit more to get credit or a good car finance deal if you have poor credit – often you’ll have to pay a higher interest, if you can find someone to lend to you in the first place.
With this in mind, it would be a good idea to check your credit score beforehand, so you have an idea of where you stand. You can do this online, with a couple of free of charge options being Noddle and Clearscore.
To find out more, our articles on how to buy a car with poor credit might come in handy.
Calculate your car buying budget, and stick to it!
Have you ever popped to your local shop with the intention of buying a packet of Doritos, only to leave with a carrier bag containing two family-size multi packs, four Crunch Corners, a can of Coke and two large Galaxy bars? Yes, us too. And buying a car can be much like this, albeit on a far grander scale.
It cannot be stressed enough how important it is to set yourself a maximum amount you’re willing and able to spend on purchasing your new car, and stick to it. Buying a car is an emotional decision, not just a logical one – we name our cars and fall in love with them, after all. Also, we all fancy the idea of driving a car that’s a bit special too, and we’ll go to our very limits to bag our dream car, even if it means going over budget to do it. This is a recipe for finding yourself heavily in debt and in financial trouble later on.
To calculate how much you can afford to spend on buying your new car, simply add your available savings to the amount you’re willing and able to borrow – as a side note, don’t forget to take into account the money you’ll have to pay each month to repay what you borrow! The figure you end up with is how much you’ve got to spend – whether your calculated budget is £500, £1,000, £1,500 or £4,000 to spend, commit to not going a penny over this amount.
As a piece of advice, never accept a car seller’s offer to get into the driver’s seat unless the car is within your budget. There’s no quicker way to get emotionally attached to a car that’s completely unaffordable – something that any car salesman worth their salt knows all too well.
New car or used car? The pro’s and con’s
Used car sales outnumber new car purchases by around 3-to-1 in the UK, and for good reason: they are much cheaper to buy!
Buying a new car has long been considered an expensive luxury, so it obviously makes sense to scour the used car market first when you have a smaller car-buying budget. But whilst buying a new car will always cost more than buying a used car, in terms of the money you have to pay upfront and the fact that they start losing their value the second they’ve been driven off the forecourt, buying new does have some real advantages over buying used – that is so long as you can afford it.
New cars – the advantages
For starters, research has shown that the yearly costs of running a new car can be up to 70% cheaper than that of a model which is 5-years older. The cost of car insurance tends to be cheaper for brand new cars, and the more advanced tech and gadgetry under the bonnet means they are more fuel efficient too.
These savings extend to all the other costs that come with running a car too, like road tax costs (low-emissions cars are exempt), MOT, servicing and breakdown cover – if you can save up to £700 per year, for example, on these running costs, you’ll save thousands over just a few years. And that’s without factoring in the cost of replacement parts you may find yourself paying out for with a used car – an unfortunate predicament you wouldn’t have to worry about, should you choose a new car with a 3-5 year warranty.
And all this is before we’ve even talked about how with a new car you can tailor its specifications to how you want it, and the much improved safety that new cars offer – something which is difficult to put a price on.
Used cars – the advantages
Used cars, on the other hand, offer two significant advantages to an aspiring car buyer: they are far more affordable, and the sheer number of them on the market means that you’ll be spoiled for choice when you set out to buy.
A car loses around 20% of its value the moment it’s driven out of the showroom, and within 3-years the car’s value will have dropped by half to two-thirds of their value. For you, the buyer, this spells quids-in – who wouldn’t want a nearly-new car for a mere fraction of the price? And the introduction of ever longer factory warranties on newer cars means that you can rest safe in the knowledge that you’ll have a few years cover if anything goes wrong. For a nearly-new used car, you’ll typically buy from by car dealers under manufacturers’ approved schemes – you’ll pay more for this, but buying from a reputable dealer in this way isn’t dissimilar from picking up a new car from a showroom.
Of course there’s always the option to opt for an older used car, which will save you even more money. However this means that there is no warranty cover, and you run the potential risk of buying a used car which could end up needing a lot of work – a money trap, in other words. With this in mind, while buying from a reputable dealer is a little more expensive than buying from a private seller, the likes of which you might find on Autotrader, Ebay or Gumtree, there will be fewer question marks over the car’s reliability and service history.
Car insurance premiums: a potential financial deal-breaker
When you’re swept up in all the excitement of buying a new car, it can be really easy to forget about the boring stuff like car insurance and car running costs.
With this in mind, the harsh realities of just how much you’ll find yourself paying out each month might come as a shock. As anybody who knows a thing or two about cars will tell you, the cost of car insurance alone can be a huge expense, especially if you’re a young/first-time driver – insurance premiums of around £1,000 upwards aren’t uncommon. And there’s no getting out of paying it either – it’s a legal requirement for drivers to have insurance cover before they can go out onto the road. Of course, some insurance companies are cheaper than others, so it is important to shop around for the best car insurance deal.
But regardless of how much you shop around, the biggest factor that’ll determine how much money you end up paying for your car insurance will be the type of car you’re driving.
There is a common sense way of looking at it: if your car has a bigger engine and a higher top speed, you’re a greater risk to your insurer than somebody driving a small, low-powered runabout. So if you’re a young driver with plans to buy a sports car with a turbo-charged V6 engine, that’s fine. Just don’t be surprised when your insurer offers you an insurance quote which costs you close to what you earn in a year for the privilege of insurance cover – that’s if they’re willing to offer you insurance cover at all. Bear this in mind when you’re choosing what car to buy.
- If you want to get a good deal on your car insurance premium and keep costs down, these are the things you’ll need to consider:
- What is your prospective car’s insurance group? In case you didn’t know, cars are divided into 50 groups by insurers – these are rated by factors like their engine size, and the probable cost of repairs. The higher the insurance group, the higher the car insurance premium. So before signing on the dotted line and buying a new car, check its rating.
- If you don’t plan on using your car that often, don’t forget to tell your insurer. A low mileage generally means a lower premium. This is because you are statistically less likely to be involved in an incident that would see you make a claim if you’re on the road less.
- A comprehensive insurance policy can offer a range of optional extras at an additional charge, but you will pay for it. Take some time to work out which additional benefits you actually need so that you don’t pay for unnecessary cover.
- The more secure your car is, the less you’ll pay for insurance – consider fitting an approved alarm or immobiliser to your vehicle.
- Increasingly, insurers are encouraging drivers to get ‘black box insurance’, which monitors driving style & speed, records behaviour, and which rewards careful drivers with lower premiums. So long as you’re well-behaved, this could be a way of saving money.
To summarise – a checklist of things to think about
There’s so much to consider before setting out to buy a car – it can all be a bit of a pain. However taking the time to do your homework and take a planned, well thought out approach to buying a car can not only help you save a lot of money in the long-run, it could see you end up at the wheel of a better car too.
Here’s a checklist of things to consider before you buy:
- Do your homework and assess your motoring needs
- How often will you use your car?
- What will you need it for? Ie. commute, picking up kids, road trips/festivals, taking dogs out, looking like a boss in a sporty 2 seater
- Research different types of car models, such as hatchback, saloon, estate, 4×4 off-roader, sportier models
- Look into car brands, mileage, reviews – get a general idea of price ranges, and pros and cons.
- If you are looking to trade in an existing car, do some digging to find out an estimate of its value, taking into account mileage, condition, model, year, etc
- Do your sums and work out your budget
- How much cash, if any, do you have upfront for a car purchase?
- What is your monthly budget for running your car and keeping it on the road? Ie. Fuel, insurance, road tax
- Find out your credit score
- If required, look at different loan options.
- How much of your monthly budget can you set aside for loan repayments?
- Consider your car insurance options
- As a rule, smaller cars attract cheaper car insurance premiums
- Fully comprehensive vs. ‘Third party, fire & theft’ or just ‘Third party’ – get the right option for you and your car
- Shop around and use comparison sites
Now that you’re all ready to go forth and buy your car, all that’s left to say is best of luck and shop smart!
Your wedding doesn’t have to cost the earth
We look back at a few blockbuster classics and their budgets from years gone by.
What hidden costs are involved when buying a house?
Money Life explores exactly how much premier league promotion is worth