5 tips for buying a car on a budget

Whether you’re considering buying your first car, or feel
it’s time to upgrade your current model, buying a vehicle can seem impossible
if you’re on a tight budget. As well as the thousands of pounds you’ll need to
spend on the car itself, you will also have to consider insurance, taxes and
other fees to cover while you’re out on the road. Luckily, a new set of wheels
doesn’t have to be as expensive as you think. Follow these tips to bag yourself
a new car at the lowest price.

Calculate your costs

You probably already have a rough idea of how much you’re
willing to spend on a new car, but you will also need to factor in the costs of
continuing to run it. Beyond keeping it insured and making sure it has a full
tank, there’s annual MOT tests and maintenance, and vehicle tax to consider, the latter of which
depends on how much CO2 your car emits.

Savvy buying techniques could help you reduce some of these
fees. For example, you can cut car insurance costs by paying annually
rather than monthly so you aren’t charged interest, or take out black box
insurance cover. This involves installing a telematics box to track your
driving, allowing you to pay less on your vehicle, provided you drive safely
and follow the rules laid out by your policy. And while electric vehicles (EVs)
tend to be more expensive than their gas-powered counterparts, buyers are
exempt from vehicle tax. Studies have also suggested that EVs are cheaper to own and run. Take all these
factors into consideration, and look for any potential deals and cost-cutting
measures. Then once you’ve set your budget, stick to it.

Decide how you’ll finance your car

Although making a single payment is the cheapest way to buy
a car in the long run, not everyone has the funds to pay up front. If you can’t
save up the money, or you need a vehicle more urgently, buying a car on finance
is an affordable short-term option.

The two main types of finance offered by dealers are hire
purchase (HP) and personal contract purchase (PCP). HP is a loan secured
against the car itself, where you’d own the vehicle after the final payment.
PCP requires lower priced instalments, followed by a lump sum ‘balloon payment’
at the end which enables you to purchase the car outright. This is also known
as the minimum guaranteed future value (MGFV), though if you no longer want the
car, you won’t need to pay it. Instead, the MGFV will be returned or, if the
car is worth more than the balloon payment, you can use the difference as a
deposit on another vehicle.

HP can often work out cheaper than PCP because you’re paying
the loan back faster. Another difference between the two is the fact that HP
plans have no mileage limitations, whereas PCP agreements will include
restrictions. This is because the number of miles you’re expected to have
covered by the end of a PCP agreement will be used to work out the MGFV. As
noted by lenders at Carfinance+, the amount borrowed in an HP
agreement is based on the car’s value at the beginning, so you’ll pay back the
amount that was agreed on at the start of the plan, even if its value decreases
over time. However, as the cost of a PCP loan is determined by the car’s MGFV,
you’re only borrowing the difference between its value at the start and end of
the agreement.

If you don’t want to start a finance plan, you could
consider using a credit card or personal loan to finance your new car . Bear in
mind that these options are usually only available if to those with a good
borrowing history, so if you don’t, it’s better to look for a car finance
provider who offers deals to people with bad credit.

Consider when you’ll be buying your car

Buying a car on Monday rather than Sunday, or in December
rather than May could considerably impact how much you end up spending.
Shopping earlier in the week is beneficial, as there will be fewer customers,
allowing you to receive more personal attention, and more time to negotiate a
better deal. Similarly, dealers are keen to fill their yearly and quarterly
quotas, so waiting until the end of the year could help you make a saving.
Ramit Sethi, best-selling author of I
Will Teach You to Be Rich says New Years Eve is the best time to buy a car. This is because it’s
the last chance for a dealer to make both of these goals and receive their
bonus, meaning they’ll be keen to shift cars as quickly as possible.

You also need to consider how the time of year could affect
demand for the particular car you’re interested in. For example, convertibles
are more popular in the summer, and four-wheel-drive vehicles tend to peak in
autumn and winter, which means you’ll be more likely to save money if you shop for
these makes out of season. Alternatively, wait until new versions of existing
models are due out, and buy the previous version during its last few weeks in
the showroom, when dealers will be keen to shift it. If you’re hellbent on
having the latest version, wait a few months after it’s launched, when the buzz
has died down. February and August are also good times to shop as dealers will
want to get rid of stock before new number plates are released in March and
September.

Shop around

Searching for a car online is the easiest way to compare
local dealers and find private sellers through platforms like Gumtree. You can
find either pre-negotiated discounts, or ask them to obtain one for you once
you inform them what type of car you’re looking for. It’s crucial to obtain
quotes from every seller you ask, in order to help you find the cheapest deal
and negotiate the price accordingly.

According to AutoTrader, franchise dealers who specialise
in one or two manufacturers are the best places to look for high quality, newer
models. You may also be able to obtain financing and warranty as part of the
service, though franchise dealers tend to be the most expensive option overall.
Independent dealers are cheaper, but may offer fewer services, and have less
knowledge of the specific model of car you’re buying. Car supermarkets are great
for a wide range of low-cost, mainstream vehicles, but will charge an admin
fee, while private sellers may offer the best prices as they don’t have
business costs to worry about. However, this method is most commonly used to
sell older models, and you’ll have less legal protection, so will have to
conduct rigorous checks to ensure you’re not being scammed. Explore all your
options to boost your chances of snagging the best price.

Try and haggle

Haggling can often feel nerve-racking and uncomfortable, but
you need to deal with it if you want to save significant sums on your car. If
you’ve researched sellers, you’ll already have some idea of what you should be
paying, and you could always supplement your understanding by referring to
online valuation tools and buying guides. This information can help you set
your starting price, which you can ask a dealer to then match or beat. You
should also keep an eye out for any minor issues with the car, like scratches
or streaky windshields, as although you can easily fix these yourself, pointing
them out may help you drive down the price.

Car sales teams almost always have room to manoeuvre when it
comes to price, though you could haggle for other perks like free servicing.
However, if they don’t offer you any incentives, don’t be afraid to simply walk
away. You should never pay more than you’ve budgeted for, and there’ll always
be other places to look.