Things to consider before making your next purchase
Buying a car is, for many people, one of the biggest expenses after a house purchase, and finding one that suits your character and lifestyle is half the battle. Making sure you can afford it along with the insurance, upkeep etc. is the rest. Here are four things to consider…
New or used?
There are arguments for both and, the intended use will be a big factor! The smell of a new car is like the smell of freshly cut grass on a summer’s day …. lovely but, buying the same car with a few miles on the odometer is likely to save you a few thousand pounds! Likewise if you intend to use the car for your family dog, or to carry around surfboards etc. you may not want to splash out on a new car that is likely to get damaged.
Brand new cars typically come with at least a 3-year warranty though, so it is a question of whether, the warranty outweighs the extra spend.
If choosing a used car, there are plenty of helpful tools you can use to make sure you are buying the right car, at the right price. Searching the local market and comparing like for like can be useful to use as a guide, likewise we are able to offer vehicle price guides using Glass’s guide which can be helpful too.
Dealer or private sale?
This all depends on the car you would like and the availability through suppliers. But let’s use the example that the car you would like is available at both a dealer and through a private seller. The dealer will typically be able to offer perks such as warranties, guarantees such as history checks and HPI checks, meaning they ensure the vehicle is not on finance prior to you buying it. There will also be some degree of protection when purchasing a vehicle from a dealer over a private seller. These additional securities tend to be reflected in the cost with higher prices than if you buy a car privately.
Buying your new car from an individual rather than a dealer can mean you get a better price but remember, there are no guarantees or protection. If the price seems too good to be true, be careful.
In either case, Smart Money can help with the finance.
What will it cost to run your car?
This is sometimes overlooked as we buy with emotion but, there is no point in having your dream car sat on the driveway if you cannot afford to use it. Below are some things to think about, it will be down to you to keep on top of them:
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- Insurance
This is most likely going to be the next biggest expense after purchasing the car. With varying levels of cover applicable to each policy meaning the cost can vary hugely too. Factors including type of car, age, and occupation along with where you live and how much you plan to use the car will all play a role.
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- Fuel
Long gone are the days in Jersey when the price of a litre of fuel was under £1 and it is therefore important to consider fuel efficiency, not only from a financial point of view but also from an environmental standpoint too. There are numerous websites available that will provide you with the rough mileage per gallon (MPG) and this can used to work out how much you are likely to spend on fuel.
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- Servicing
If you are buying a car from a private seller (and some dealers) remember that the vehicle most likely won’t have any form of warranty so it’s important to consider the cost of servicing and repairs that may come later down the line.
Older or rarer vehicles may have been discounted or, there are no longer manufacturer parts available, so they may cost more to source. It might be worth putting a small amount aside every month to budget for any unexpected costs.
The same goes for new cars, whilst they will come with warranty as time goes on, this will expire. After this point the cost of all repairs will be down to you.
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- Breakdown Cover
Whilst this is an optional extra it is always worth considering. Whether you use your car solely on the island or frequently take it away, it always gives peace of mind to know your costs will be covered in the event of a breakdown. Some insurance policies will include this but always check. If not, there are always third-party companies that can provide this for example, RAC and AA.
Paying for the car
If you are fortunate enough to have the money available in the bank to use, this naturally gives you the option to purchase the car outright without any borrowing. However, in the current climate more and more people are looking to spread the cost rather than pay out a lump sum. There are numerous ways to fund your new car:
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- Hire Purchase (HP) and Personal Contract Plans (PCP)
These products are offered by brokers, lenders, dealers, and manufacturers although being in Jersey, some manufactures may not offer the same products as they do in the UK.
You will pay a monthly figure each month for both types of products, however, Hire Purchase (HP) means at the end of the loan term you become the legal owner of the vehicle. There is also the option have a HP with a balloon (residual) which is intended to keep the monthly repayment lower but, you will be liable for a large sum at the term end to clear the finance and own the vehicle.
Personal Contract Plans (PCP) is a product that used to be widely popular however, over the years some lenders have decided to pull this product. PCP is like a HP with a balloon however, at the term end you can either choose to pay the lump sum or, hand the car back the dealer with no costs as the loan would have been based on the vehicles pre-determined value at the term maturity from inception. It is worth noting that there are often milage and damage limits appliable so check before you sign.
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- Unsecured Personal Loan
It used to be common that people would take out an unsecured personal loan to buy a vehicle and, this is still the case for some people however, it is worth noting that an unsecured loan will always have a higher rate than a HP. In most cases, when lenders know the loan is for a car purchase, they will request security to be taken meaning it becomes a HP.
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- Credit Card
This means that you own the vehicle from the start and is useful if you can obtain a low-rate credit card – it will depend a lot on your credit score and, being in Jersey, whether or not the providers will offer this. Remember, pay off the balance in full before the interest free or low interest period ends as the rates will sharply increase thereafter. Note, if you are not on a low rate credit card, we would suggest avoiding this method entirely, unless you have the means to clear the balance in full within a few months.
What’s next?
Now that you have decided on the car and taken into consideration the costs and financing options discussed above, it is now time to proceed with the purchase. If you would like a quote or any further information on any of the above please speak to Business Development Manager, Josh Le Corre on 01534 288961 or Joshua.lecorre@smartmoney.je and he will be only be too happy to assist.
Thanks for taking the time to read our insights and we hope you have found them useful.
