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Whether you’re about to buy a car for the first time, or you’re upgrading your current vehicle, finding the right car at the right price is an arduous task. Even if you know the exact type of vehicle you want down to its colour and specification, taking on the car dealer, filing through a contract and getting to grips with the jargon would put even the most enthusiastic motorist to the test.
That’s why we have a compiled a guide to buying a car for all types of motorists no matter what vehicle you are in the market for. Read on for our car buying tips so you can be sure you’re in the driving seat when you find the car of your dreams.
IS BUYING A CAR RIGHT FOR YOU?
Before you even start on the road to buying a vehicle you need to think about whether it is the right choice for you. Are you financially stable enough to cope with monthly payments? Would other forms of transport work out more cost effective? Indeed if you live close to your work and social scene, do you even need to buy a car at all?
Also think about the alternative methods of car finance – hire purchase, car leasing and personal contract purchase. Generally speaking, leasing a car will be right for you if you want to change your vehicle every few years, want lower monthly payments and have a stable lifestyle whereas buying works out best for those who drive a lot of miles, have a lifestyle that might change and enjoy having ownership of a vehicle. For more information on car leasing, check out CarLeaseGuide.co.uk or visit ContractHireAndLeasing.com to compare rates.
FIRST TIME CAR BUYER TIPS
If this is your first time buying a car, there are some important factors to consider:
- What type of car do you want (and can you afford)?
Unfortunately picking a new car isn’t as easy as just grabbing the car you want – or else we’d all be driving around in Porsches, Ferraris and the like. You need to think about what you can comfortably afford – and this goes beyond your monthly loan repayments.
Think about how much it costs to run the car. Would parts be difficult and expensive to replace? How many miles can the car travel before you need to refill the petrol tank? What are the insurance costs going to be and can you afford the payments (remember, car insurance is a legal necessity)?
Also think about what tax band the car fits into. The Government issued a series of tax bands on March 01, 2001, based on the levels of CO2 emissions produced by vehicles. The least polluting vehicles, such as electric and hybrid cars, fit into the top two tax bands meaning you have little or no tax to pay. However, as pollution levels increase so does taxation.
Research is the key to securing a competitive price for a new or used car. Shop around for good deals online so you have an estimation of the price you should be paying.
- How should you finance your car?
Look closely at the best methods of car finance for the vehicle of your choice. Remember to compare like for like – if you are taking out a car loan, compare the annual percentage rate; ask how much you will repay each month and how long the repayment period will be. Also, ask for the total amount you will repay after interest and all costs are included.
Generally speaking you should put down the biggest deposit you can afford to reduce your monthly payments. Work out how much you need to borrow and remember to check the terms from different lenders. Secured loans are often cheaper than unsecured loans, but they do carry more risk – if you take out a secured loan against your home and you do not keep up repayments, it could be repossessed.
- How do you establish your credit history?
One of the biggest barriers you may face as a first time car buyer is a lack of credit history – especially if you are young and do not own your own home and/or do not have a credit card. It is a good idea to check your credit history before you apply for a loan, as every loan application that is rejected will hurt your credit score. Contact a credit reference agency such as Equifax or Experian to get a copy of your credit profile. People with bad credit will face higher loans.
If you do not have any credit, you must establish it. You can improve your credit score by taking out a credit or store card and paying it off each month. Remember not to run up a balance or you could find yourself with debt issues – and besides, creditors do not like to see a credit card balance above 50%.
Lenders will also review your employment history so it helps to have an established monthly income and to have been employed by the same company for more than six months. It also helps to have been living at the same address for more than six months to show you have stability. And remember to always pay your bills on time so you don’t receive any black marks against your credit score.
- Consider co-signing for a loan
If you can’t get approved for a loan of your own (and most young people without an established credit history won’t be able to) then ask your parents or guardian if they will co-sign on the loan with you. This puts the loan in the name of two parties at once and benefits you because it allows you to build credit. However, this does carry an extensive risk because if you default on the repayments, your parents become responsible – if neither of you can pay, then both credit scores will be affected and your car will be repossessed.
In the second part of our car buying tips guide we’ll look at the process of buying new cars.
Move on to part two of the car buying tips guide…
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