Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
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Buying a new car might seem like a costly venture – but there are several benefits that you need to weigh up first before making the decision. Reliability is the number one bonus of a new car – plus they often come with insurance, breakdown, and servicing costs bundled in for the first few years, which could save a lot of cash when it comes to running costs. Of course, buying a new car can mean a bigger upfront payment – but there are ways to save money on a new car purchase, too. Let’s take a look at the pros and cons of buying a new car.
Are Grants Available for New Car Purchases?
How to Save with Scrappage Schemes
Finding Deals on a New Car with Motorfinity
When weighing up the initial cost of buying a new versus used car, it’s easy to look at the up front price and think the best deal is a used car. However, a new car can be surprisingly affordable with hire purchase and leasing options like those offered through Motorfinity. If you’re a member of the UK’s Armed Forces, Armed Forces Veterans, Emergency Services personnel, NHS staff, or part of the Education and Social Care sectors, you’re entitled to their exclusive discounts on brand new cars.
New cars will often come with warranties for repairs, several years’ worth of servicing included in the price, and sometimes insurance, road tax, or even fuel bundles to incentivise you to buy. It’s important that you work out how much each ‘extra’ like this would cost you if it weren’t bundled together, but it will usually be a significant saving. On some finance types and agreements, you can also change your car every few years (subject to the necessary checks) to ensure you always have an up-to-date and reliable vehicle for you and your family.
You also get peace of mind with a new car. Not only does the warranty cover repairs if there is a mechanical or computer issue (i.e., not an issue caused by having an accident), it is far less likely to have any problems compared to a used car. The more miles a car has done in its lifetime, the more likely it is you could be faced with an unexpected, often large, repair bill.
New cars also have the latest in safety technology, so you can rest assured they are completely up to protecting you and your family. Older cars bought used also run the risk of being previously written off or having hidden damage from flooding or accidents, leaving the car less safe than you may think it is.
Finally, new cars also offer favourable options in terms of insurance and running costs, because a car that’s less likely to break down is an attractive option for insurers and breakdown services, while a smooth-running engine is as efficient as it can be.
Buying a new car isn’t for everyone, of course. You might feel the cost of a new car – even with buying schemes – outweighs what you can afford. Or, you may want to be able to own your car outright from the day you buy it – which, unless you have a large amount tucked away in your savings, isn’t possible.
A used car can be beneficial if you need a temporary vehicle while you save up for a new one – for example, if you’re family is about to expand with a new baby, your finances will be focused on planning for your new arrival. But your two-seater sports car won’t handle a buggy in the boot, so a temporary solution is a used car until you can afford a new car.
Used cars can also be good for people who don’t have a great credit score and find it difficult to get car finance loans or credit agreements. If you can’t make the monthly payments on a new car agreement, you could end up without a vehicle and in debt.
Finally, if you buy a new car outright it will almost immediately depreciate in value the second you drive it away from the dealership. A used car will also lower in value over time, but at a much slower rate, so if you’re planning to recoup some costs of your car purchase in a year or two, a used car might hold its value better than a brand new one.
There are sometimes grants available to lower the cost of a vehicle, but at the time of writing these are thin on the ground. The Low Emission grant reduces the cost of new low emission vehicles, but this reduction is already included in the price rather than a grant provided to the buyer.
If you’re disabled and need an adapted car, the Motability Foundation charity can provide grants for things like advance payments for adapted leased cars or to pay for adaptations to your car. The costs of adapted vehicles vary widely, and can make what might seem like an affordable car become a very expensive one. These grants are designed to help mitigate the cost of adapting your car, with the aim of you never being out of pocket for your disability adaptations compared to someone who doesn’t need them. Motability is also a scheme for those who receive certain elements of Personal Independence Payment, which can help disabled people afford to buy or lease a new car.
You might have seen scrappage schemes which offer cash or trade-in value for your old car in return for buying a new one. The Government ULEZ scrappage scheme is available to some people who live in London and want to change their petrol or diesel car for an Ultra Low Emission Zone (ULEZ) compliant car.
There are lots of eligibility restrictions and the amount you get could be less than the value of your car, but it’s always worth looking at to do your sums in case it is a beneficial scheme for you. The ULEZ scrappage scheme currently offers up to £1,000 for eligible motorcycles, £2,000 for eligible cars, and £10,000 for wheelchair accessible vehicles.
If you’re in the market for a low emission vehicle, you’re usually much better off using discount services like Motorfinity to access purchase options for electric and hybrid vehicles on a lease arrangement.
So, you’ve decided to buy a new car. What now – and how can you save on the purchase?
First of all, work out which type of car finance you want. Hire Purchase (HP) lets you pay an initial deposit with monthly payments that pay off the car so you own it at the end of the contract. A lease is like renting a car. You have no or a lower up-front payment and more affordable monthly fees than HP. You don’t own the car at the end, but that means you can easily renew a lease for a newer model when your contract is finished, trading in your three-year-old car for a brand new one to keep enjoying the safety, technology, and reliability benefits of a new car.
The third option is to get a Personal Contract Purchase (PCP) agreement, where you pay a non-refundable deposit, monthly payments, and then at the end of the lease you decide whether to pay off the rest of the car in one go to own it outright, trading it for a new PCP contract, or return it to the dealership.
One of the best ways to save when buying a new car is to look at how much you can pay up front. The more you can afford to pay as an initial down payment, the better. You can then either shorten your lease length (often saving on interest fees) or take on much lower monthly payments.
It’s important to shop around and look for hidden discounts, too. Motorfinity offers discounts to key workers and defence staff, so if you’re a carer or a teacher or work in the NHS or armed forces, you could benefit from a significant discount on your new car.
You can also talk to dealerships to see what else they can offer when you’re buying a new car – whether that’s a reduction in the purchase price or including added extras like a fuel card, insurance, servicing or even customised elements of the car (like an upgraded SatNav) for free. This might not save you cash up front, but it’ll save you in the longer term.
Finally, if you already own a vehicle, part exchange can be a fantastic way to reduce the cost of buying a new car while also solving the problem of how to get rid of your old car. Part exchange means you will get a better deal on your new car as the value of the old one is offset against the price of the new one.