Buying a car is often one of the largest purchases a person will make; naturally you want to make sure you’re not making any mistakes.
It’s easy for excitement to take over and run head over heels into a deal that isn’t right for you.
So what should you consider?
Should You Buy a New Car or a Used Car?
Cars lose value the second they leave the showroom. Three years after that, the car will typically be worth 30-40% of the original price. So it's wise to let someone else take that financial hit and buy a used car if you’re a first time buyer.
However, when buying such a major purchase, the manufacturer or seller will provide a warranty. If something goes wrong within the warranty the company will either repair or replace the car.
Each warranty can be different so it’s wise to check out what’s covered within so you don’t get a nasty shock if something goes wrong that isn’t covered. You also won’t have to worry about how the car has previously been used and abused which is a major plus.
There are around seven million used cars sold each year in the UK. Used car sales outnumber new car purchases by around three to one.
If you’re going to buy a used car, the best cars of this kind are mainly found within manufacture approved schemes. You’ll likely pay more for it, but they’ll provide you with a lot more information and you’ll have an expert to ask any questions to.
What’s your budget?
Your budget will help you decipher if you can afford a new or used car. You have to be realistic about your budget to ensure you do not run into money troubles later on. If you stretch your budget too far and are left with little or no savings, even a small drop in income could harmfully affect your finances.
You’ll need to take running costs into account to ensure you can afford to keep it after purchase.
The average UK motorist spends around £1,679 a year on just running their car.
This figure does not include the money you’re losing each year on cost depreciation.
To put clearly, the below graphs display the total cost of running a car annually, including depreciation.
It’s important to note that although a used car costs more to run, the new car loses more of its annual value. When you come to sell your car, this will affect the price you’ll be able to get for it.
The figures will also vary depending on things such as the choice of insurance package, if you’re a first time driver, size of the engine and how many miles you do.
Finance can be a great option for someone who wants to buy a new car but falls short on the money side.
Two new studies show 47% of people who take out car finance don’t know how much they’ve borrowed (around 3 million people). Nine out of ten don’t understand the terms of their finance agreement. This can include conditions such as excess mileage fees that increase the balance owed considerably.
It’s now been discovered that 90% of new cars are purchased on finance. That’s a scary figure considering that one-third of people have no idea that multiple applications for credit can damage their credit score
Aside from new vehicles, 1.4 million used cars were purchased with finance in 2017. This means that nearly 6 million people in the UK have a car that is funded via a finance scheme.
These figures aren’t to say that getting a car on finance is a bad decision. Of course, if you have the money available, paying outright is always the better option.
RAC research discovered that around 10% of motorists are struggling with their car repayments. Half have had to cut back on spending to keep up with the repayments and others have been penalised for handing back keys because they simply cannot make the payments.
The lesson to learn from these statistics is that you need to know exactly what you’re signing for.
Extensively look at the terms and condition because breach of these can cause you to either loose the car or not be able to afford the added costs. Finally, make sure you’re choosing a finance scheme that you can afford and don’t damage your credit rating doing it.
Should You Buy Online or in Person?
Going online, like anything, let’s you browse quickly and at your own leisure. Most websites will have extensive details on the car’s specifications and also let you compare one car against another. Looking online means you don’t have to get into a conversation with dealership staff when you’re only at the stage of browsing.
However, you may like a car online but feel differently when you see it in person. Not seeing it in person also means you can’t really judge what condition the car is in.
Upon reading a description about things such as the condition, you have to trust that the seller is being truthful. This won’t always be the case and you may not know the true condition of the car until you go and view it, or until it’s too late.
Firstly, the main advantage which is made clear within the last section, you can physically view it. Dealerships may also offer you added extras to convince you into purchasing from them, a great way to get something for free.
There is also the advantage of having someone to ask questions to right away, without having to Google your way through pages of information. They wouldn’t be working there if they didn’t have product knowledge within the car industry so you’re sure to get the detailed answer you want.
Dealerships can also supply you with various finance deals, which is a big plus for those not buying their car out right.
Dealerships are often seen as overpriced, its common knowledge that they will buy the car for less than you can buy it (after all they need to make a profit). It’s by how much some of them increase the price that bothers buyers. You’ll need to be sure you’re not paying above average by looking around at the same make and model online.
If you’re not comfortable with hard sales tactics then going to a dealership might not be for you. Haggling and being informed may be the only way you’ll walk out of there with a good price.
How to get a Reasonable Price for Your Car Insurance
Thinking of how much the insurance will be on the new or used car you want is a crucial part in looking at your finance capabilities.
Tony Forchione, Insurance Analyst at Money saving Expert said ‘Car insurance costs are still heading north. They’re up almost 6% in the past year, according to the latest MSE Bills Tracker. Fight back by playing the key tricks, including never auto-renewing. Instead of auto renewing you can check to see if you can lock in cheaply.’
The average driver faces an annual insurance premium of £680 with drivers younger than 25 paying over £1,400 for cover.
The Test Drive
So what are you looking for on a test drive? Overall you want to get a general feel for the car. You really want to push the car to its limits to see how it reacts, the car may be okay driving at 30 miles per hour but this might not be the case once you’re driving at 70 mph on the motorway.
Listen out for any rattling; little signs like these can actually be a big sign for expensive faults. You should also test the electrics as these can be expensive to fix. Push every button; try the heating and the screen cleaning facilities. You’re in control and have every right to look and try absolutely everything in the car.
One that’s easy to forget is to look under the bonnet. Spotting any signs of rust or damage can save you overpaying for a vehicle that only appears to be up to scratch on the exterior.
You’ll also want to check that the mileage matches the number they advertised and also that the documents match the vehicle identification number (you can find this at the bottom on the window screen usually).
Condition of the Tyres
Checking the condition of the tyres is a must, make sure to notice the tread depth and sidewall damage. A quick and super easy way to test the depth of the tyre tread is the 20p test. Insert a 20p coin into the main tread grove; if you can see less than half of the 20 at the bottom of the coin, the tread is coherent with the legal limit.
Currently, the penalty for illegal tyres is a fine of up to £2,500 and three penalty points for each illegal tyre. Most recent statistics show that 8 people were killed and 120 seriously injured in road accidents where illegal, defective or under-inflated tyres were deemed to be a contributory factor to the accident.
Uneven tyre wear could mean that the wheels aren’t aligned; this doesn’t necessarily mean the car has been mistreated as it could have simply happened through hitting a pot hole or kerb at an angle.
You may also spot signs of the wheels not being aligned through vibration on the steering wheel or the feel that the wheel is pulling more towards one side than the other. If you feel as though the wheels aren’t at the standard you require, you may wish to ask for money off of the asking price so that you can get these done after purchase.
How to Pay for the Car
Ensure you’re completely happy with the car and the price before you do anything. How you pay will depend on factors such as how much the car costs and if you’re buying it from a dealership or private seller.
Paying for a car with cash seems to be widely preferred but you’ll need to be careful. If you’re going to exchange large amounts of money you may want to do it in a very public place and also with family or friends around.
Paying via a dealership poses a lower risk and they will most likely have a safe payment method that you can follow.
If you’re paying for a car with a private seller a practical and safe way to go about it is to meet at a bank and take the money out then and there. This way the seller knows the money isn’t fake and you know you’re in a safe environment and not walking around with large amounts of money.
Other sellers may be more comfortable with a bank transfer; it’s instant and safe for both the seller and buyer.
What Do the Experts Say?
We asked UK Car Finance to share their 5 top tips to consider when buying your next car.
1. What do you need from your next car?
Enough room for the kids? Large boot space? Petrol, diesel or hybrid? Manual or automatic? Before you start looking, make sure you know what you need. It saves a lot of time and filters down your options straight away.
2. Are you buying at the right time?
New registrations come out in March and September every year. This can work to your advantage if you want either new or used. Many dealerships have great introductory offers on their new cars. But also, the customers who want a new car will more than likely part exchange their old one which usually increases the number of used cars for sale!
3. How will you pay and what is your budget?
Determine how much you realistically have to spend on your car and factor in other payments such as insurance, MOTs, road tax, fuel and more. Buying with cash is a great way to get a car, it means that you own the car and aren’t tied down to monthly payments. If the finance route is for you, you could calculate your car loan before you even apply and see what rate you would potentially be offered before browsing through a range of cars.
4. Have you done your depreciation research?
If you’re buying a new car, it’s worthwhile doing some research on the depreciation values. Did you know that a new car loses almost 50% of its value within the first 3 years? This means when you come to sell it later on, you could be offered half what you paid for it originally. There are many things that contribute to a cars depreciation rate including mileage, number of owners, fuel economy and service history. If you’re unsure, you can use find out the estimated depreciation cost of a car with The Money Advice Service.
5. Should you go solo or take some support?
For many people, buying a new car can be quite daunting, especially when visiting a dealership. If you feel confident enough to do it alone, that’s great. If not, taking someone with you is a good idea. They can provide support, make sure you’re getting the best deal and spot any problems that you may not have.
What Happens After the Purchase?
Both of you will need a receipt, so that means two copies of the same receipt. Included must be the date, price, registration number, the car make, the model and both the seller and buyers name and address.
You’ll need to complete and send the V5C to the DVLA. The seller must also give you the car’s handbook and all sets of the keys to the car. You’ll need all documentation such as the MOT certificate and service receipts if they have them.
You may also wish to take note of the buyers name and address on a separate piece of paper just in case you need it should anything go wrong.
That’s everything; you’ll drive away in your new car knowing you’ve gone about it in an informed and safe way. Following these steps and being cautious will give you peace of mind that you got the right car, at the right price.