To some people, learning to drive and owning a car is a rite of passage. But not everyone can afford to own a car – especially in this day and age with insurance and fuel costs constantly rising. Before you go full-speed ahead and buy yourself a vehicle, make sure you’ve weighed the financial costs.
Work out your buying budget
Before you go looking for cars, it pays to have rough idea of the figure that you’re willing to spend. Ideally, you should be able to afford 20% of the car’s value. This will allow you to apply for a decent loan that’s not going to rip you off in the long run – some companies will allow you to pay gradual amounts over a series of many years, but in this time you’ll accumulate interest that could make the whole thing needlessly expensive.
If you can save up first it may be worthwhile. This could allow you to increase your budget and not simply settle for the only car you can afford.
Calculate running costs
As well as having a budget, you’ll need to account for other costs such as insurance, fuel, road tax, repairs and servicing.
All of this can depend largely on the vehicle. Cars that produce fewer emissions can result in lower road taxes – for electric cars you won’t have to pay tax at all. Tank capacity and economy settings could determine how much fuel you guzzle up. Car models that are prone to crashes or faults meanwhile may result in higher insurance premiums and greater chance of costly repairs.
Of course, there are steps you can take after purchase to reduce running costs. Advanced driving courses could lower your insurance. Biofuel and fuel economy gadgets could affect your gas consumption. Emissions tests may even reduce your tax.
Weigh up the cost of these after-purchase methods against regular running costs to see if they are worthwhile. You can do all this by using an online car costs calculator tool.
Counter your credit score
Even if your budget works out, your attempts to take out a loan from a lender may fall through if you have a bad credit score. In these cases, it pays to know your auto loan options. Some loan companies specialize in providing loans to people with poor credit ratings. You should target these and not simply approach any old loan company, as this may result in multiple rejections, further decreasing your credit score and leading to a vicious cycle of rejection and steadily decreasing credit score.
Of course, you don’t have to take out a loan and can pay by credit card. Not all dealers accept credit cards and some will insist you pay the merchant’s fee, but it could be a preferable alternative for some.
To get a better idea of what you can get within your budget, make sure that you shop around. This includes private sellers and dealerships. Dealerships on average will charge higher prices to account for the running costs of their business. However, you may be able to get certain bundle deals at a dealership that you can’t get with a private seller. You can negotiate the cost in both situations – most dealers expect some haggling. Private sellers may be more firm with their price, whereas you may have more room for movement with a dealership, as well as having the option to ask if they can throw in free extras (a useful bargaining tool if a dealer isn’t budging on a price).
Be wary of old cars
New cars will always be pricier. By opting for a used car over a new one, you may be able to get practically the same model for half the cost due depreciation.
However, you should be wary of going too old. Older used cars will have done more mileage, which means the engine will have suffered more wear and tear. This could result in some expensive repair costs further down the line.
Consider the distance that you will be realistically driving in your car and whether you’re likely to go over your mileage. Your car won’t spontaneously combust the moment it runs out of miles on the clock, but it will increase your insurance and mechanics will be more wary when servicing.
When shopping around for old cars you should always look into their service history as this will notify you of any recurring faults or minor problems that might have been uncovered during an MOT but weren’t worth fixing at the time. If the car has a healthy record, this could be a good sign that you don’t have to worry about expensive future repair costs.
In some cases, you may be able to budget for cutbacks when buying a car. If you’ve previously travelled to school or work by bus or train, you can make up these costs with a car (although driving will probably still work out more expensive).
If having a car is mandatory to your job or you live in an area where driving is a necessity, then you may have to consider making some cutbacks to your lifestyle in order to afford a car. By driving to some social events you may be able to cut down on alcohol spendings, as you’ll be forcing yourself to keep to limit. Alternatively you can cut back on other costly treats and luxuries.
Don’t let owning a car take preference over basic essentials. Cycling or moving to a more convenient place may be a cheaper solution to living remotely. For specific occasions you may be able to rent a car. There are also sharing methods that can make owning a car cheaper – either with a flatmate, partner or family member.
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