You won’t get that sweet new car smell out of a ten year old hatchback, but can you afford to miss out on all the great used bargains?
Buying new
When you’re after a new set of wheels it’s hard to know where to start; all those different models with a choice of engines, transmissions, fuels and body styles can be really daunting. Just knowing whether to go for new or used can be tricky enough; your mind is usually made up by your budget, but even then things aren’t always that simple. There are so many incentives to buy new nowadays that it’s very tempting to take that route – but then the world is full of used cars, with some fabulous bargains to be had, so can you afford to ignore the second-hand option?
As is so often the case, it all comes down to money. It doesn’t matter how you look at it, buying and running a new car will always be more costly than opting for a used one. That’s because of the curse of the new car buyer; depreciation. You can’t escape depreciation; it’s inevitable that once you’ve used something, it becomes worth less than when you bought it still in the wrapper. Even worse, depreciation is usually the biggest single cost in running a new car, yet it’s the one that’s usually overlooked because it’s hidden from view – until the time comes to sell.
But enough of the bad news; there are several good reasons why it’s worth buying new. The obvious one is that anything you buy will come with a guarantee, usually a three-year one that should give you peace of mind should problems arise. Another major bonus of buying new is that (in theory at least) you won’t have to fork out for many replacement parts for at least the first three years. Well, apart from service items and tyres if you do a lot of miles.
Of course the biggest attraction is that feeling you get when you take delivery of a car that nobody has used before. You know the car has never been in a shunt, that its virgin paintwork is exactly as it left the factory, and there are no worn parts lurking anywhere.
The reality is that new cars are amazing value for money, and that’s before you start negotiating a discount. However, if you’re buying a new car at the lower end of the market, a fundamental problem you’re up against is that profit margins on small cars are much smaller than those on bigger ones. Building, transporting and selling small cars is still a costly business, so there’s less room for haggling than if you’re buying something bigger. The savings are also typically smaller; but as you’re forking out less to start with, you have less to lose as the car sheds value.
Car makers know there are certain things that will tempt buyers into showrooms, which is why they tend to offer the same incentives all the time. Typical offers include:
Free insurance
This is the one that might sway things for you, because it can represent a pretty massive saving. Unfortunately, it’s not unusual for cover to be offered only for drivers over 21, although sometimes it’s possible to buy cover at much-reduced rates. Vauxhall currently offers cover for 19 and 20-year olds for just £199, as long as they buy a Corsa Club 1.2. Also, you may have to stick with the same insurer once you’re paying for cover, but it can save a hefty wedge of cash for the first year that you own the car.
Zero per cent finance
This is okay if you’ve got a reasonable income or the money sitting in the bank, but be very careful. To qualify for 0% finance, you often have to stump up a hefty deposit (sometimes as much as 50%) then pay the loan off within a relatively short space of time, such as two years. This isn’t always the case though; Vauxhall currently has three and four-year 0% finance deals available, with just a 20% deposit required.
Cashback
This is much like a price cut, in that you pay a figure which is less than the standard retail price. Any price cut is obviously useful, but how big the cut is will dictate how useful an incentive it is. The biggest cuts will be on the costliest models, and there’s often little or no choice of engine or trim. For example, Citroen is currently offering up to £895 cash back on the C1 – but not every derivative is eligible.
Good/Bad
- You know the car’s history
- Incentives usually available
- There’s a warranty
- Niggling faults are common
- You’ll lose a packet in depreciation
Buying used
So, buying new is costly – which means a used car is much cheaper, right? Well, yes; you’ll save cash, but if you buy badly you’ll regret every minute of your rash purchase. There isn’t space here to cover all the things you need to consider if you buy a used car, but suffice to say that if you get it wrong you’ll soon be broke. On the flip side, if you get it right you’ll have decent transport for far less than if you buy new. To minimise the risk of things going pear-shaped, take a look at some of the many online buying guides; there’s a good one at autotrader.co.uk and another one at http://uk.cars.yahoo.com.
Even with a meagre budget you’ll be amazed at how far your money will go; most mainstream cars shed value at a faster rate than ever before. As a result, you can often get into something just two or three years old for a stupidly small amount of dough. The secret is buying something that isn’t a moneypit; buy in a private sale and there’s no warranty. Buy from a dealer and there has to be some sort of guarantee by law, but it may not be very comprehensive.
One of the beauties of buying used is that the previous owner(s) should have ironed out any problems as they’ve gone along. Many new cars have annoying little faults, but by the time it’s sold to its next owner, everything has been sorted. Well that’s the theory anyway, but we all know somebody with a used car horror story.
So if buying new is costly and buying used is a nightmare scenario waiting to happen, what’s the solution? Luckily, there is one – and that’s to buy something that’s nearly new. The biggest chunk of depreciation occurs as soon as a vehicle is registered; even if the car isn’t used between registering it and selling it to a new owner, it’ll lose a hefty chunk of value. That’s why homing in on a car that’s got hardly any miles on the clock is a good idea; it’s in the same condition as a new car, but it isn’t as expensive. Of course it’ll still cost you more than an older, higher mileage example – but it offers the perfect balance of value with peace of mind. Especially as it will come with the balance of the manufacturer’s warranty. Sorted!
Don’t get caught out
- There’s potential for endless grief when you buy a used car, but there are ways you can minimise the risk. Follow these simple steps and avoid those sleepless nights.
- Buy from a reputable dealer, as you’ll then have some sort of warranty. Only buy from a private seller if you know them or you have the car inspected by someone who knows what they’re doing.
- Take a look at what’s being asked for similar cars elsewhere, so you don’t pay over the odds. A look at www.autotrader.co.uk will quickly show you what you should be paying.
- Don’t ever consider buying a car without taking it for a test drive first. Even if you know nothing about cars, you can tell if the brakes or suspension are shot just by taking a trip round the block.
- Haggle hard before shaking on the deal. Nobody pays the initial asking price, so expect the seller to come down at least a bit.
- If you’re not confident, take somebody with you who is. They’ll need to be comfortable checking the paperwork such as the MoT, registration document and service history.
- Read up about what goes wrong with the model you’re thinking of buying. The web is teeming with forums full of disaffected owners who can give you pointers on what to look for.
- Before you even look at the car, get an HPI check done. This will tell you whether the car has had a registration plate change, is subject to outstanding finance or has been involved in an accident. Look at www.hpicheck.com for more on this.
- If there’s any damage or wear to anything, don’t under-estimate the cost of putting things right. If in doubt, only make an offer once you’ve got a definite price to make the car good.
Good/Bad
- Cheaper than buying new
- Running costs also lower
- Niggles ironed out - hopefully
- Warranty basic or non-existent
- Easy to get stitched up