What’s the cheapest way to buy a car?

We’re in the market for a new car, so we want to know the most cost-effective way to buy one.

My husband is convinced that a new car will work out cheaper in the long run – but then, he thinks that a two-seater sports car is the best option for our four-member family, so I’m not too convinced by his arguments.

But could he be right? About the new car, I mean, not the sports car. I’ve been looking into it…

A second-hand car

We always buy second-hand cars; my current Vauxhall is an ex-motability Zafira, which meant it was just three years old and fully serviced when we bought it.

This would be my preferred option now – finding a car new enough to only have very minor problems, but old enough to have lost a great deal of its value.

Of course, buying a second-hand car isn’t risk free. If you buy from a private seller then it’s essentially sold as seen, but if you buy from a dealer then they will have marked the price up.

Unscrupulous dealers may even try to conceal faults. However, you could always pay more and have a full technical inspection, such as a technical inspection offered by DEKRA, costing from £99. That pretty much ensures your vehicle is safe and there are no nasty surprises – so this is always what I would do.

But even with no obvious problems, an older car is more likely to need work - so could a newer car save us more in the long run?

[How flattery can get you a better deal]

A brand new car

It’s widely believed that when you drive your new car off the forecourt, it immediately loses so much value that you’d be better off buying a second-hand one.

This is certainly something I believe and it’s part of the reason I always aim to buy a car that’s around three years old. That way I know it’s fairly new but I won’t take the devaluation hit.

But that received wisdom was blown out of the water by recent analysis from Moneysupermarket showing that brand-new cars can be up to 73% cheaper to run.

Take the Peugeot 208, which I think would make a perfect car for my husband (and NOT a two-seater). It costs an average of £748 less a year to run a brand new one compared to a five-year-old model, making the new one much cheaper.

Of course, what’s cheapest depends on the model and the condition of a second-hand vehicle. But this does mean it’s not always right to assume new is more expensive.

 
Leasing a car

One thing we’re considering is hiring a car instead of purchasing one. All cars depreciate in value, so could it be cheaper to rent one instead of buying?

With a leased car, you pay a monthly fee, which can include running costs such as your MOT and any servicing. As long as you don’t exceed your agreed mileage, that’s the total cost of your vehicle – plus tax, petrol and insurance of course.

But you never own the vehicle, so at the end of the contract you don’t have anything to sell. However, you have also not had to cover the initial depreciation, which can mean you save money overall.

Month by month, this certainly seems to be a cheaper option – rental payments are typically less than a finance deal. And the dealer is responsible for selling the car afterwards, so they take the hit if it has devalued by more than expected.

The consumer magazine Which? reviewed some popular cars to find out whether it’s cheaper to lease or. For most, it was cheaper to buy, however the Ford Mondeo 2.0 TDCi Zetec was cheaper to lease.

For us, a major plus is that we’d be able to drive a new car without worrying about the risks of ownership like depreciation or wear and tear. We’d also potentially get to upgrade to another new car in three years.

However, I am quite put off by the idea of constantly paying for a vehicle – there would never be a point where you own the car and can just drive that if you can’t afford to upgrade.

Buying at auction

One thing we’ve considered is buying our next car at auction. This is certainly a way to find a cheap vehicle, but we don’t just need a cheap car, we need a reliable car.

[How to find a bargain car at auction]

Mostly the people picking up motors at auctions are dealers, but British Car Auctions report that around 10% of its customers are private buyers looking for a car for personal use.

Reading around online forums, it seems that buying at auction can save you hundreds or even thousands of pounds on a car, as there’s no dealer needing to make some money.

However, you also need to know what you’re doing. You need to be able to quickly assess the value of a vehicle and to have some sort of clue about whether it’s in good shape. Cars sold at auction are often ‘sold as seen’, meaning you’ll have very little chance of complaining if there’s an issue you didn’t spot.

Some cars will be sold with descriptions such as ‘no major mechanical faults’, so it’s really important to listen to the auctioneer’s description.

One tip that every auction-regular gives is to visit an auction before you go to buy, so that you understand everything that’s going on. Then know what you’re looking for and set a budget.

We’re very tempted by the potential savings of buying a car this way. However, I’m put off because of concerns that we wouldn’t spot any major faults, or might get carried away by the competitive nature of the auction and pay more for than we meant to. 

If you’re interested in buying a car at auction, there’s a lot of information available on the British Car Auctions website.

What do you do when you need a new – or new-to-you – car? Where do you look? What are your tips for avoiding being ripped off? Share your experiences and insights in the comments below.