New year, new car?

If you need to upgrade your car, there are all sorts of things to think about. But it’s not just about how much you can afford, you’ll also need to consider practical aspects too, like engine size, boot space and maintenance costs. So, to help you work out what you need, here’s advice from our experts.

Calculate your budget

Needless to say, working out your budget is one of the first and most important steps to take. Remember that buying a brand-new car is likely to be the most expensive option and getting the marque of your choice could mean you end up compromising on the car’s specification.

However, if you’re not so bothered about being the car’s very first owner, buying nearly new or used can be the wiser choice, especially if you need to stick to a budget.

Don’t forget to factor in other costs too. This includes servicing and making sure you budget for MOTs (if the car is three years old or more). Knowing how much a car’s tyres cost can also help you work out long-term affordability too.

Consider the type of car you need

Think about what you’ll be using your car for. This will give you a good idea of the most suitable model and style of car for you. For example, if you drive a lot, comfort might be an important consideration. Similarly, if you do a lot of motorway miles, a more powerful car will give you the acceleration you need. 

If you’re using the car for the school run or carrying equipment, something spacious with enough boot space is likely to be a top priority.

To help you stay focussed, it’s worth putting together a list of all the features that are important to you. Referring back to your list every now and again should hopefully remind you of what you actually need (as opposed to want) which can make it easier to stick to a budget.

Check what finance options are available

Buying your car upfront in one lump sum is always going to be the most economical method. Of course, for most of us, parting with thousands of pounds in one go simply isn’t realistic, which is where finance options come in, including:

  • Personal contract purchase (PCP) – you usually pay a deposit followed by fixed monthly payments for a set length of time (typically three years). At the end of the plan, you can hand the car back, pay a final (usually higher) instalment to buy the car outright, or use the remaining value of the car to part-exchange it for a new one (with the same dealer).
  • Hire purchase (HP) – you’ll pay a deposit and make fixed monthly payments for an agreed period of time. At the end of the contract, you’ll own the car.
  • Personal loan – taking out a personal loan means you can buy the car outright from the dealer, but you’ll make repayments to the lender instead.
  • Credit card – depending on the cost of the car and your credit limit, using your card is also an option.

As with all finance and credit arrangements, the better your credit rating, the more favourable the terms of the loan and the better the interest rate. You’ll have to keep up to date with payments too or face late fees. Missing multiple payments can also affect your long-term credit rating and could mean the car is taken away by the credit lender.

Check car insurance costs

Car insurance is likely to be one of the biggest ongoing expenses you’ll face (along with fuel). If you’re concerned about the cost, look for cars in low insurance groups (there are 50 in total). As a general rule, cars in the lowest numbered groups are the cheapest to insure. This is because they generally cost less to buy and repair. They usually have smaller engines too.

If you’ve got a particular car or make and model in mind, you can also compare car insurance quotes. If you’d like to start a quote to see what’s available, simply answer a few questions right here, and you’ll be able to compare prices from a number of leading insurers which can help you decide which car’s right for you.