As a rule, you have three options when t comes to buying a new car. You can buy it outright; either used or brand new. You can get a car loan, and pay it off over a set period. Or, finally, you can try leasing. In this guide, we’re going to talk you through the pros and cons of each.
OK, so the most cost-effective method of grabbing your next car is buying it outright. You have two options when you buy outright. The first is to buy brand new while the second is to buy used.
While most of us have the occasional dream of buying completely new, the truth is it isn’t worth it. Because of depreciation, your new vehicle will drop in value almost immediately after you sign the ownership papers. Plus, after around two years, there’s a good chance it will have had up to – and possibly more than – half its original value wiped away.
So, your alternative is to buy used. Look for a car that is a minimum of two years old and you should find the perfect balance of cost and low mileage. Also, when it comes to resale, you will make a far higher percentage back than you would from buying new. Let’s say you buy a £20,000 vehicle straight off the forecourt. If you sell it in five years time, you could expect to get around £8,000. Now assume you bought the same car when it is two years old, for around £10,000. Five years down the line you could still get seven grand for it.
Getting a loan
While loans work for people who don’t have access to a large amount of cash, you have to decide whether or not you are getting a good deal.
With many car loans or financing deals, you will be looking at paying back an extra fifty percent in interest, on top of the value of the car. So, over five years, say, a £20,000 car will end up costing you closer to £30,000.
However, there are ways around it. Getting a cheap loan and buying used is a sensible option because you will get more value when you sell it on. It will take a while to work out the maths, but it’s something you should have to do if you are looking at financing of any kind.
The lease option
Finally, let’s take a look at the leasing option. This is when you make monthly payments for a car, but you never actually own it. However, all services and maintenance are taken care of, and after a few years you can get a new car. In terms of costs, it very much depends on the car you choose.
For example, let’s say you are looking for a Toyota RAV 4 lease. Look online see your options. You can find some excellent guides for the range of money you will be talking about for both business and private ownership. While you won’t have anything to show for it, the payments can work out a lot cheaper than those you would make for a loan. Leasing is certainly a great way to get a better car if you are struggling to raise the funds to buy outright.
Well, we hope that has answered some of your questions about how to buy your next car. If you have any questions about what we’ve been talking about today, feel free to let us know.