Setting a budget for your car
You might already know exactly how much you are going to spend on your next car, but if not we've got a few helpful tips:
The first thing to consider is the best way to pay for the car. Apart from good old-fashioned cash, a popular way is to use some type of finance such as a loan. There are a variety of finance options available and it is well worth taking the time to think about which will be best for you. Choices include a personal loan from a bank or building society, a hire purchase agreement from a car dealer, or a personal contract plan.
Whichever method you choose, it is important to gather as much information as possible about repayment amounts, interest rates, the length of the loan, and any fees or charges that might be payable. This will make comparisons easier and allow you to choose a deal that is right for you.
Think about the running costs of potential purchases, expenditure such as insurance, fuel costs, and road tax. For vehicles registered on or after 1st March 2001, annual road tax is linked to the fuel type and exhaust emissions produced by the car, so a more polluting vehicle could add a few hundred pounds to your annual running costs.
Think about servicing and repair costs. On premium makes and high performance cars, these can be considerable, and skimping on maintenance could affect the value of the car when the time comes to sell.
Depreciation (the amount a car reduces in value as it gets older) is still the biggest cost to a car buyer, and is well worth factoring-in to your calculations. All cars lose some of their value over the years - some more than others – and car magazines and price guides normally provide figures for popular makes. If you intend to keep your car for a long time, depreciation is less of a factor. However it becomes more important if you are using a loan or hire purchase agreement to buy your next car – it is extremely useful to have an idea of what the car will be worth once the repayment term has finished as this could be the amount you use to help fund your next purchase.
Don’t forget to factor-in the value of your old car. Getting the best price can add a significant amount to your budget and help to reduce the cost of any loan repayments.
Lastly if you are considering a loan or a hire purchase agreement from a dealer don’t be pressured into accepting a deal with high repayments or interest rates. If you have any concerns, it is well worth seeking independent financial advice before committing yourself - it could save you a lot of money in the long-run.