Now more than perhaps ever before, household budgets are under extreme pressure. Buying and running a car is one area where hard decisions are being made. For some people, the question is whether they really need a car at all or whether they can afford one. The costs can soon add up. Above and beyond the cost of buying cars, fuel-price increases are rarely out of the news and then you have insurance and road tax to consider. Those basic costs come before you factor in maintenance costs and repair bills should something go wrong.
Buying cars is a major undertaking for many but there are some techniques to bear in mind to minimise those ownership costs.
For many people, buying a car on a budget means buying second-hand. This, however, is not always the case. Many car manufacturers have excellent deals on budget new cars and if you shop around and get your timing right, you might just scoop a bargain. Look out for dealers wanting to shift stock to make way for a new model and also be aware that many dealers have targets to meet at the end of months, quarters and financial years. Shop at one of these times and you might just find that the dealer is very open to doing a deal.
In some cases, buying a new car is a good way to take the uncertainty out of owning a car. Many manufacturers have deals including three years of servicing costs and extensive warranties to cover any mishaps. Some will also throw in insurance and even road tax, leaving you just with the fuel to budget for. Another way of getting this kind of deal is to plump for leasing. Many personal contract hire deals include servicing* and having a single payment can make it much easier to budget.
If your budget will not stretch to a new car, however, there are still other good options open to you. A significant portion of the cost of car ownership is in depreciation. Typically a new car loses 20% of its value per year over the first three years. That means that a car costing £10,000 will be worth only £4,000 after three years. Depreciation slows after that to around 15% a year. Buy that car when it is three years old and it will still be worth £2,200 after a further three years. Bought new, the car has cost £6,000 in depreciation. Bought second-hand, it has lost only £1,800.
Second-hand cars used to be thought of as something of a risk but many manufacturers today offer warranties of five or even seven years. Buying the right used car then could see you still having excellent warranty cover. Before heading off to the dealer, though, you should do your research. Be realistic about what kind of car you need and check the reviews to make sure it has a good reputation and you know what to look for. Make sure you know the right price to pay for the car and be sure that you understand insurance, tax and running costs. Finally, used-car dealers have targets too, so consider selling your existing car first to remove trade-in issues and make it easy for the dealer.
*Our new contract on the Skoda CityGo includes service.
photo credit: Georg Schwalbach (GS1311) via photopin cc
If you keep a car forever, the value or loss of value is less of an issue. Cars can last a very long time, if maintained well. Buying and selling cars is where you lose most of your money.
@Krant: Agree! In fact buying and selling anything is where one looses money (houses, for instance). Buying and keeping a car though is a matter we need to think about again, I believe – there is much to be said about having a new(er) model.
We are buying a new car right now. Well in the next week or so… We are going to lease it because we love the idea of not owning it. Actually I call it an inexpensive rental.
In 3 years we can give it back and do something else.
@Jai: We have been doing this for sometime now. In fact one of the mistakes we made last year was to buy the car we were leasing – shortly after we decided that we don’t really need or want a thursty Merc (lost money selling it). Now leasing again; the lease is a very good deal and the service is included in the payment.