For many of us, owning a car is a necessity. We often depend on our vehicles to get us to and from work every day and do the school run. But with the average cost of a new car exceeding £27,000, getting a bad deal can cost you a mint.
Here is our guide to buying – and running – a new car without breaking the bank.
Things to consider before you buy
Make sure you have your money sorted
Unless you have a hefty wad of cash to pay upfront, it is crucial that you get the financing right. Make sure you carefully do the maths before you even set foot in a show room.
For those with a stellar credit report, opting for a low-cost personal loan is a sensible option.
According to figures from Moneyfacts.co.uk, you can borrow £25,000 from the AA at an interest rate of 5.8%, for instance. This would mean monthly repayments of £479.27 and would end up costing you £28,756.20 over five years – or £3,756.20 in interest over the life of the loan.
If your credit rating leaves something to be desired, worth a look are hire purchase deals arranged by dealerships. These spread the cost over anywhere between one and five years. You are typically required to handover a down payment of 10% before you get the keys, but you then pay reasonably competitive rate for the period – usually around five years - and on the day you make the final payment the car is yours.
Generally speaking, personal contract plans are worth avoiding as despite the lower monthly repayments, they tend to be more expensive in the long run. At the end you can choose to either hand the car back to the dealership and pay nothing, or stump up the difference between the sale price and the price for resale and keep the car.
Don’t forget to look for interest-free offers from the manufacturer. While you will need to stump up a larger deposit (around 35% is common) you will also need to ensure you never miss a payment or you will be switched to a higher interest rate.
Check insurance costs in advance
Before making an offer on that new set of wheels, consider the cost of insuring it. You might find that they are so steep that all of a sudden that new 4X4 doesn’t look as appealing.
It’s also a good idea to calculate the cost of premiums so you can factor that amount into your purchasing equation.
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Ways to save while car shopping
Get the timing right
The run up to Christmas is the best time to secure a good deal on a new car, as this period is between new plate releases and the dealerships will be quiet.
While March is an ideal month to look for a bargain on a used car because due to new registrations having just come out, most dealers would have taken in a lot of part exchanges against new cars. The increase in supply means that buyers this month will be in a better position to haggle the price down.
What’s more, if you are after a sports car, the colder winter months is a great time to grab a bargain. As convertibles are most expensive during the summer months, by shopping in the winter when demand is low you will save a bundle.
Further add to your savings and make your purchase in the final days of the month (or better yet, the quarter) as the dealership will do everything they can to complete a sale in order to hit their sales targets.
Keep your cards close to your chest
Wait until you’ve come to a final price on your new car before telling the salesperson you want to trade in your old one. It’s important to keep these transactions separate. Otherwise, the dealer may jumble the two and lead you to overpay for the new car without knowing it.
Dealerships make a fortune on most car financing, so if you are paying in cash, try to haggle on price before declining the financing so that they don't factor in the fact they won't make any money on financing.
If you are going to take the finance package, you can let the dealership know, but don't let them negotiate on the monthly cost. In some cases they will simply stretch the loan over a longer period so they can quote a lower monthly cost - which will end up costing you more in interest.
Get a helping hand with haggling
Many of us are not comfortable with haggling for a discount – and even if you are, there is no guarantee that you will get it. So why not consider a car broker? Similar to a how you would use a mortgage broker to secure a good rate on your home loan, car brokers operate by finding cars for their clients, doing the deal, then introducing their customer to the dealership. They can get bigger discounts than regular customers and the good news is that it doesn’t even cost you a penny as they earn their fee from charging dealerships on every car they sell.
Skip the factory fresh model
Always opt for a car that is currently on the forecourt. As the dealership already has this asset on their books, they will be keen to get it off the lot.
As factories build cars constantly, there is very little incentive for the dealer to offer you a discount.
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Keeping the costs down after you get the keys
Keep your car in tip-top shape
If you balk at the high cost of fuel, it makes financial sense to try to save on petrol costs – and this starts before you even put the key in the ignition.
It may sound hard to believe, but a poorly tuned engine can use up to 50% more fuel, so it is important that you change your oil and follow your car manufacturer's recommendation on servicing.
Bear in mind that simply using the manufacturer's recommended oil can improve fuel efficiency by 1-2% while replacing a dirty spark plug, for example, can save as much as 5%.
Keeping an eye on tyre pressure is crucial, as not only are correctly inflated tyres safer and longer lasting, a tyre that is under inflated by just 1psi can reduce fuel economy by up to 3%.
Keep an eye on what you are lugging around as figures reveal that for every extra 100lb or 45kg you carry in your vehicle, fuel efficiency drops by 1-2%.
Chill out to cut car costs
Driving like a maniac doesn’t just raise your blood pressure, it can mean you plough through as much as a third more in petrol. Avoid these unnecessary costs and try not to accelerate or brake too hard while keeping your steering as smooth as possible.
An easy way to master this is to imagine there is a cup of coffee in the cup holder. Smooth driving prevents it from spilling; go too fast and you could get burned, much like your petrol.
What’s more, many drivers wrongly assume that it is the distance we travel that is burning a hole in our wallets, when in reality, when it comes to fuel consumption, speed is just as important.
Figures from the AA indicate that driving at 70mph uses up to 9% more fuel than at 60mph, and up to 15% more than at 50mph. Cruising at 80mph can use up to 25% more fuel than at 70mph.
Go with the flow to make the most of your fuel
Momentum is one of the biggest things of which drivers should take advantage when it comes to petrol costs. Always remain in gear but take your foot off the accelerator early when slowing down or driving downhill, as this reduces fuel flow to the engine to virtually zero.
Always carefully look ahead beyond your normal range of vision, so that you can prepare for junctions, roundabouts and hills. However, bear in mind that safety must never be compromised, especially considering that figures from Shell suggest that a third of accidents are "rear-end shunts", when a vehicle ploughs into the back of a stationary one.
Be quick on the gears
If, like most motorists, you drive a manual, try to be in the highest gear possible in order to maximise fuel efficiency as the higher the gear, the lower the engine speed.
The trick is to change up a gear whenever you can, without labouring the engine – especially important when you pull away or when accelerating.
Experts suggest that changing up at an engine speed of around 2,000rpm in a diesel car or around 2,500rpm in a petrol car is most efficient.
A good rule of thumb is, the lower the gear, the less time you should be in it.
Get paid to take out an insurance policy
When it comes to getting your insurance cover, always buy through a cashback website. These are special websites that list retailers/product providers and get paid if you click through them.
Importantly, they then give some or all of this cash to you. Remember to read the small print; only genuine transactions that are completed wholly online will pay.
Pay your insurance premiums upfront
If you pay for your insurance all in one go, rather than monthly, you will pay less.
Do not be tempted to pay for any type of insurance monthly just because it appears to be cheaper or more manageable. It is not, as you will be charged interest, which can be as much as a third more per annum.