Buying a new car

With the new registration plate coming out in early March, many drivers will hold off from buying a new car until then. Whether it’s your first car, your current car has come to the end of its life span or you fancy something different, there are a number of avenues you can explore when looking to buy a new car.

How to choose a new car

If you’ve decided that now is the perfect time to buy a new car, there are a few things to consider when choosing the make and model you want to go for.

Fuel Type

It’s important to consider what fuel you want to power your new car. Some cars are only available in specific fuel types and if you want an electric car, for example, this might limit your options. If you are thinking about getting a plug-in hybrid or an electric car, consider whether you have somewhere convenient for you to charge up. Petrol and diesel engines are still the most popular, however, many manufacturers are now announcing that they will no longer be making diesel versions of their cars.

Body Type

There are now lots of body types to choose from, so you will be able to find one suited to your lifestyle. For example, if you have a big family to ferry around, an MPV might be the obvious choice for you. However, if you do limited city driving, a better option might be a hatchback. Models like the Nissan Qashqai combine some features of SUVs and hatchbacks which might suit someone who works in the city but has more adventurous weekends in the countryside. There are many crossovers appearing on the market, so you’ll be able to find a body type that suits you.

Payment options

Cash

The cheapest way to buy a car is to fund part or all of it with cash as you’ll have to pay interest on any loan or finance agreement. Ensure that if you do use savings to pay for your car that you have enough left over for emergencies.

Personal Loan

You can get a personal loan from a bank, building society or finance provider if your credit rating is good. Then you can spread the cost over several years. However, make sure the loan is not secured against your home otherwise you’ll be putting your home at risk if you fail to make the repayments. Shop around for the best interest rate by comparing the APR (annual percentage rate).

Hire purchase (HP)

Hire purchase is a way of buying a car on finance, where the loan is secured against your car. This will involve paying a deposit, usually 10%, then making fixed monthly payments over an agreed time period. This means you don’t own the car until the last payment has been made. Hire purchase agreements are usually arranged by the car dealer so tend to be convenient to arrange and can be very competitive.

Leasing – Personal contract hire (PCH)

With personal contract hire you pay the dealer a fixed monthly amount for the use of a car. As long as your mileage doesn’t exceed a specified amount, servicing and maintenance of the car is included. At the end of the agreement, you hand the car back, it never belongs to you. Leasing usually costs more per month than personal contract purchase however the total cost can work out cheaper with the servicing and maintenance costs included.

Personal contract purchase (PCP)

This type of car finance deal is similar to a hire purchase agreement but you usually pay lower monthly payments. Bear in mind though that the total amount of money you’ll pay back is often higher. Instead of getting a loan for the full cost of the car, you get a loan for the difference between its price brand new and the predicted value of the car at the end of the hire agreement. This is based on a forecast of annual mileage over the term of the agreement. At the end of the term you can:

• Trade the car in and start all over again
• Hand the car back to the dealer and pay nothing
• Pay the final payment of the resale price of the car and keep it

Credit Card

It may be worth considering buying a new car using a credit card if you get one with a decent interest-free period. Obviously, this will depend on whether the lender will grant you enough of a limit. With a credit card, you will also have some degree of protection thanks to the Consumer Credit Act.

Responsible Lending Advice

• Never borrow money that you do not believe you will be able to repay, work out your budget
• Spend time shopping around, researching what’s on offer and getting advice
• Be careful borrowing money to pay off existing debts
• Be careful signing up for interest-free deals
• Don’t borrow from loan-sharks
• Know the difference between secured and unsecured advice
• For more advice contact your local Citizens Advice.

Go for a test drive

Once you’ve considered aspects like body type, fuel type and how much you want to spend, now it’s time to make a list of potential models and take them for a test drive.

You should be able to call a local dealership and organise this without a problem. Have a think about whether you’d like to test drive a bigger or smaller engine, which type of gearbox you’d prefer and whether there are any extra features you’d like to test at the same time.

If this is going to be a family car, take the family along so they can get a feel for it. For example, if the kids aren’t comfortable in the back, this probably isn’t the model for you.

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