Stuart Masson, owner and editor of The Car Expert, shares some of his top tips for buying your car. From paying for the car right the way through to running costs, Stuart has lots of hints and tips that could help you get on the road!
How are you going to pay for your new car?
The vast majority of cars are purchased using some form of car finance agreement.
Different types of finance can work in quite different ways, so it is important to understand exactly what you are committing to.
The personal loan is the most traditional form of borrowing for a car. It’s easy to understand and the annual percentage rate (APR), which is your total interest and fees, is usually very low compared to other forms of finance.
Dealer finance is normally in the form of a Hire Purchase (HP) or Personal Contract Purchase (PCP). PCP finance is popular because the monthly payments are usually relatively low, but the sting in the tail is that there is a large final payment that has to be paid off at the end of the agreement.
A lease is a rental agreement, meaning that you are simply hiring the car for the lease period and then giving it back afterwards. Leases usually have competitive monthly payments, but they tend to have very severe penalties if you need to cancel the agreement early.
How much can you afford to spend?
Before you think of a deposit and finance agreement for a car, you need to consider any upcoming expenses that you will need to pay.
Look at your monthly income, and subtract all of your regular expenses (rent/mortgage, utility bills, subscriptions, food and living costs, etc.) to work out how much you have left to spend. Give yourself plenty of buffer room – if you think that you have £400 available each month for your car, don’t spend all of it on the car finance payments. You will need to leave plenty for fuel, insurance, road tax, servicing, and so on.
You also need to keep enough money aside to allow for unexpected costs, like a puncture or an unexpected breakdown. It may even be worth having a separate savings account to keep this money away from your regular cashflow in your current account.
Is your credit score up to scratch?
If you are going to apply for finance of any kind, it’s important to make sure that you don’t have any problems with your credit score that may affect your ability to be approved by the bank or finance company.
You can get a copy of your credit score and credit history from several providers, and it should cost no more than a couple of pounds. Don’t assume that the information will be correctly recorded, check it thoroughly before applying for finance. If the wrong address is listed you could get rejected. If you have had previous credit agreements, make sure they are all listed as completed with no outstandings.
Stuart Masson is the owner and editor of The Car Expert, and an authority
on the UK car marketplace. Stuart has followed the global car industry for over thirty years. He spent a decade in the
automotive retail industry, and now works tirelessly to help car buyers with
independent and impartial advice.