By Melanie Wright
1. Know your financing options
If you don’t have savings available, there are several different ways to pay for a new car, including taking out a loan, using a personal contract purchase plan (PCP), or signing up to a hire purchase agreement.
Make sure you think carefully about how you’ll fund your purchase before you go car shopping, and compare the overall cost of the different options. If you’re not sure where to begin, comparison site Confused.com offers a car finance comparison service, which shows you deals from a range of different finance providers.
2. Check your credit record
It’s a good idea to look at your credit record to see how likely you are to be accepted for any finance deal.
“Lenders use an individual’s credit report to prove the identity of an applicant, as well as to see how consistently they have repaid loans in the past” explained Lisa Hardstaff, credit information expert at credit reference agency Equifax. “Any missed payments or defaults might mean that an individual is less likely to repay a loan and this could affect their ability to get the best car finance deal.
“Anyone looking to buy a car on finance should make sure that all their payments are up to date and they should close any old accounts to ensure they don’t seem over-reliant on credit.
3. Understand the tax rules”
Check how much vehicle tax you’ll have to pay on the car you’re considering buying. If you’re purchasing an electric car no tax is payable, but if you’re buying a low-emission hybrid or a car with a normal combustion engine, the amount of tax you’ll pay will be partly based on the level of CO2 emissions. You can find the different tax rates at the Gov.uk website.
4. Make sure you’re covered
Always compare a wide range of insurance policies before buying cover for your new car, as the cost of premiums can vary widely depending on which insurer you go to. According to research by comparison site Comparethemarket.com, drivers who opt for an electric car are having to pay 45% more to insure their vehicle than the average motorist. The average annual car insurance premium stands at around £740, but it costs almost £1,070, on average, to insure an electric vehicle.
5. Remember how quickly cars can depreciate in value
Don’t forget that most cars start losing value as soon as you drive them off the forecourt. If you’re worried about depreciation, you might want to consider what is known as Guaranteed Asset Protection (GAP) cover. This will cover any shortfall between the amount the insurer will pay out if your car is stolen or written off and the price you paid for your car. You may be offered this type of cover by your car dealer, but always shop around elsewhere before buying to make sure you find the best possible deal to suit your needs.
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