One of the most important big ticket purchases you’ll make in your life is a car. It’s a big step in life. Often people will buy a car before buying a house because houses cost a lot more than cars. When buying a car, there’s a lot to consider with so many options out there on the market at all different price points and different purchasing options. In this blog post, we’re going to list a few things to consider when buying a car. Regardless, it’s a good idea to test drive a car you’re considering buying first. If you have a spouse or partner, it’s good to speak to them and make sure you’re on the same page.
What’s your budget?
A lot of purchases, including buying a car, are going to be based on your budget. Some people prioritise having a nice car because they’re car enthusiasts. Others don’t really care about their car and just want something that gets them from Point A to Point B. And then you have those who don’t even want a car at all. Whichever camp you fall into, that’s okay.
Like many consumer goods, inflation has affected the cost of cars. For example, The Dacia Sandero has jumped from under £9k new in 2020 to over £14k new in 2024, The Renault Zoe has gone from costing under £14k in 2012 to £30,495 in 2022 (the biggest jump), The Volkswagen Polo has jumped up in price from under £10k in 2012 to almost £19k in 2022, and a Tesla Model S has ballooned in price from just under £72k in 2012 to just under £95k in 2022.
Some thrifty people have gotten into bangernomics, where they buy an old car outright for very cheap, they don’t need a loan for it, and then do the maintenance themselves. This could be something to consider if you’re handy and know how to fix cars, you don’t mind driving something that doesn’t have a modern look or the latest tech, and you understand that you may have to replace it earlier than if you had bought a new car. However, the downsides are that old cars are less fuel efficient and may not have as many safety features.
Whatever you do, you need to make sure you have a budget and your financial foundations in place so you know what you have to work with and you can buy a car that’s within your means. In general, you should not live beyond your means.
What are the ownership costs?
Buying a car is not the only expense, that’s just the beginning. You also have to consider other ownership costs like petrol, insurance, maintenance, and if you’re driving in a clean air zone unless it’s an ultra low emissions vehicle, you’re going to have to pay a charge each day that you drive in a clean air zone. These costs add up and you need to take them into consideration. More expensive cars can use more expensive petrol and the maintenance and cost to insure these cars can cost a lot more.
The ownership cost of cars is no exception to being affected by inflation. According to a Guardian article, UK car insurance premiums have increased by 34% on average from 2022-2023. To put it in perspective, this is the biggest increase in Europe. Pay special attention to the “on average” because some drivers have experienced car insurance premium hikes of over 50%. This is especially tough for younger drivers who don’t have as much experience and don’t make as much money as someone who is older and further into their career.
New or used?
As we all know, as soon as you drive your car off the lot, it depreciates straight away, so getting a used car can save you a lot of money. You might want a new car because you can pick the colour, customise it to your liking, and it comes with a full warranty. Newer cars tend to be more fuel efficient, so that’s a long term savings. Used cars can be a way better value. You might be able to get a used luxury car for the cost of a new budget friendly car. However, used cars may not have a warranty. If they have a lot of mileage, then they might cost more to maintain.
Own it or lease it?
If you plan on keeping your car for a long time, buying a car is a better deal because you own it and you don’t have any restrictions on mileage and customisation. However, buying a car comes at a higher cost with higher monthly payments and upfront costs and you have to worry about depreciation and. However, if you’re someone who likes to have the latest and greatest and don’t have the money to buy a new car, then leasing a car may suit your needs better. You also don’t have to worry about selling it. The catch is there are mileage and customisation limits. You might also have to pay the dealership a fee if there’s excessive wear and tear.
Electric, hybrid, or regular?
With petrol and diesel prices on the rise, it’s tempting to get an electric car. From 2012 to 2022 the price of diesel has gone from £1.47/litre to £1.96/litre and petrol has gone from £1.41/litre to £1.88/litre. The price per litre on average is lower now at £1.50/litre for petrol £1.44/litre for petrol, but it will probably go up again over time. From 2015-2022 yearly electric vehicles sales have skyrocketed from 29,254 to 367,558 and that number will keep increasing over time.
The government’s goal is to have all new cars sold be zero emissions by 2035 so you might not be able to buy a new car that uses petrol for much longer. Electric vehicles have been criticised for being not as environmentally friendly as they claim since they don’t always have the best mileage, manufacturing comes with its own carbon footprint, and electric cars are still powered using the electric grid. Besides, there’s nothing sustainable about buying new things you don’t need. Hybrids are good option because they’re cheaper than electric cars, but they’re much more fuel efficient than regular cars that use petrol. However, if you’re in the market for a new car, it’s important to consider future-proofing. Right now there are limited numbers of charging stations for electric cars, but they are increasing.
What are your needs?
There are different cars for different purposes. When buying a car, you need to take into consideration how you’re planning to use the car, what your situation is, and what your situation in the future could be. Do you drive for long distances or do you drive short distances? How big is your household or your family? If you’re planning to start a family, you might want a larger car so you can comfortably fit everyone in it. For road trips, you might want to get a car with a bit more leg room instead of a compact car. Those who like to go on adventures and go off-roading might want a car with a 4-wheel drive suitable for that. Depending on the smartphone you use, you might want to look at cars with compatible infotainment systems.
Buying a car is one of many important financial decisions that you’ll make. If you’re looking for clarity on your finances, you might want to speak to a financial adviser. If you’re looking for a financial adviser, book your free one hour discovery meeting with Neil today.