A car is one of the most significant purchases many of us will make. The initial cost, maintenance and petrol, as well as aesthetic upkeep all cost money. Whether for commuting, family use or weekend convenience, having a car can make a big difference. However, your car is a depreciating asset. So, for every year that you have it, the car drops in value. If you want to get the most out of owning a car there are a few key things to consider when you buy.
New or used?
Officially, cars fall into three categories: new, nearly new (under three years old) and used. Which one is right for you will depend on a number of factors, such as your experience and intended use. If you’re a first time driver then you might want to consider a nearly new car, rather than an old banger that will push your insurance costs up. If you’re not sure what car you really want then a used car might be a better choice than spending big on a new model. If only new will do then bear in mind that a pre-registered model will cost less than a factory order. Pre-registered cars have already been ordered by dealers to sell on, rather than being your own brand new order. They can costs hundreds – even thousands – of pounds less.
Car finance – how to pay for the car
According to the Society of Motor Manufacturers and Traders, 2.63 million new vehicles were registered in 2015. Although figures vary, around 80% of private buyers are thought to take out some form of finance when purchasing a car. Without car finance, most of us would find it difficult to get such a large sum together to purchase our own set of wheels. So, car finance has revolutionised the motor market. If you’re considering buying a car then you have a choice of an outright purchase, Personal Contract Purchase (PCP) or a Hire Purchase (HP).
A PCP car finance deal requires a deposit and payments over a fixed term. At the end of the term you have the option to make a final payment to own the car, move on to a different car, or you can simply return the car. PCP offers a great deal of flexibility and is one of the most popular ways to finance a car purchase. HP contracts work in a similar way. A deposit is made at the start of the contract, followed by a number of regular payments. These payments tend to be higher than a PCP contract but at the end of the HP payment schedule you own the car. Your best option will depend on finances and whether you want to own the car once you’ve finished making payments.
Choosing the right model
When you’re buying a car, dealers will often hone in on the technical specifications of the car. However, while mileage to the gallon and top speeds are important, for most drivers it’s the little details that matter. Something as small as a cup holder could make a big difference to whether a particular model feels suited to you. There are a number of factors to consider, including how the car locks, how it copes with a wet road, how the doors open and what boot storage is like. What kind of music system is there, what about air con and do you have room in the back for kids/dogs/shopping etc. Take the car for a test drive and do a comparison with any car you already drive. Aesthetics and performance are important but, in the end, it will be your driving experience that matters the most.
When it comes to insurance, cars are one area where it really does come in useful. And it’s not just a ‘nice to have’ either, as you must have motor insurance to drive your car on UK roads. Insurance can cover you if you have an accident and damage another car and can help with repairs and third party damage too. Getting the cheapest deals on car insurance means doing plenty of research first. You will also need to bear in mind the car make, age and model – very new and very old cars are more expensive – and where you live. If you can store the car off-road then you can cut the cost of your insurance. Opt for a telematics policy (where a black box monitors your driving) and you can cut costs even more. Add alarms and immobilisers and keep the car in a garage and you could significantly slash your insurance premium.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley