Photo by Kelly Sikkema on Unsplash
Over the past few years, the cost of running a car in the UK has skyrocketed. During the pandemic, car manufacturers had difficulty in sourcing materials, and getting their vehicles made and delivered to dealers. As a result, prices rose steeply. Although they have started to fall this year, the difference in ticket prices is still quite shocking. Figures produced by the insurance comparison company Nimblefins demonstrate this:
- In 2019: Small cars ranged from £12,000 to £17,000, medium cars from £22,000 to £36,000, and SUVs around £23,000 to £28,000.
- In 2024: Small cars cost from £19,000 to £25,000, medium cars from £26,000 to £28,000, and SUVs from £26,000 to £32,000.
This coupled with the fact that the price of virtually everything else has also risen steeply has left many struggling to buy a new family car. Fortunately, there are ways to keep the cost down. Below are the ideas that will save you the most.
Educate yourself about car financing
For most people, their finance payments are the biggest motoring expense they have. As a result, anything that you can do to keep this cost under control will have the most significant impact.
In the UK, you can still borrow money for your car from the bank, but most people use an HP agreement or a PCP contract for their car finance. Both options work well and can be used to buy new and used cars. But there are significant differences between the two. For example, because of the way the loan is structured the monthly repayments for a HP agreement tend to be higher than those for a PCP contract. Understanding those differences as well as the pros and cons of each product will help you work out which option is right for you.
Even if you have used vehicle finance in the past it is still worth reacquainting yourself with the subject. Over the years, things have changed, which means not refreshing your knowledge could leave you missing out on a way to save money.
Improve your credit rating before buying a car
Regardless of which type of car finance you choose, having a better rating will significantly reduce how much you pay in interest and fees. You can easily find out what your current rating is and use credit-building apps to help you improve that rating.
Doing so could be the difference between securing finance with a 15% Apr and a loan with a 12% APR. If you borrow £10,000 over 36 months with a 12% APR, you end up paying £1,851.95 in interest. Borrowing the same amount for the same period at 15% APR would cost you £2,314.07. You can do a lot with the £462.12 you will save.
Be more flexible about what type of car you drive
There is something special about having a vehicle with a prestige badge sitting on the drive. But it is still worth considering buying a cheaper make and model. You will pay thousands less for your purchase with the added benefit that your maintenance, road tax and insurance bills are also likely to be significantly lower.
Put down as big a deposit as possible
The bigger your deposit is, the smaller your car finance loan will be. That fact alone will potentially save you hundreds in interest.
Consider buying a slightly older car
For some people buying an older car will be a viable option. Because of depreciation buying a 3- or 4-year-old car will save you thousands.
Shop around for the best price for everything
When it comes to anything relating to motoring, shopping around for the best deals will save you a lot. This is the case whether we are talking about car financing, the showroom price of the vehicle, insurance, servicing, or fuel.
The above suggestions will save you the most money. None of the above are complicated and they all work regardless of your financial position or the type of vehicle you want to buy.
