What to look for when buying a car
Owning a car can be expensive. According to data from the Office for National Statistics, depreciation, insurance, fuel and other operating expenses related to car ownership cost the typical UK household over £3,000 a year. In fact, this data shows that households spend a whopping 12% of their budgets on transportation expenses related to private vehicles.
So, if you’re in the market for a car, here are some simple hacks that could save you thousands of pounds.
Buy a used car instead of a new car
One of the ways to buy a car which could save you money is by purchasing a used vehicle instead of buying new. A new car loses a significant chunk of value in the first few years when depreciation rates are highest. It will then continue to lose value each year it’s on the road.
For example, the Money Advice Service reports that a new car loses 15% to 30% of its value in the first year alone and up to 50% or more of its value in the first three years, but this can vary on factors like mileage and the make and model of the car. As a result, buying a car that’s a few years old can save you thousands of pounds versus buying new.
The only drawback to buying a used car is that you might face larger potential maintenance costs for cars out of warranty. One way around this is to buy a used-approved car from a dealer, as these typically come with some sort of warranty to protect you should something go wrong with the car.
Buy a car that’s fuel efficient
With the average car clocking 7,600 miles a year, a typical car owner in the UK spends a whopping £1,200 a year on petrol. If you’re in the market for a car and want to save money on transportation costs, good fuel efficiency should be at the top of your wish list. Depending on how much you drive, choosing a car that delivers higher miles per gallon could save you hundreds of pounds a year on fuel.
While choosing a hybrid or electric car will save you money on powering your car in the long run, these vehicles typically cost more to buy than an equivalent petrol or diesel car.
Don’t follow the trend of buying an expensive car
According to car licensing data from the Department for Transport, UK consumers are opting for more expensive cars than they were 10 years ago. This is in part due to the ease of securing a loan to buy a car such as Hire Purchase or lease agreements. But just because you’re seeing more flashy cars on the road doesn’t mean you need to follow suit.
To save thousands on your car purchase, opt for a reliable, mass-market car instead of paying up for something more expensive. As much as you might love the idea of driving a luxury car, it may not be worth the added cost if you’re trying to stick to a budget.
That said, if your heart is set on a luxury vehicle then consider going for a used approved model. Dealers often sell ex-demonstrator vehicles with all the features, so you might be able to save on a used car which would also come with a warranty period.
Buy a car in a low insurance group
Car insurance, whether you buy from one of the larger car insurance companies or a smaller, niche brand, could cost you hundreds or even thousands of pounds a year. Since one of the biggest factors determining the price of car insurance is the make and model of a car, you could save money on your car insurance premiums by choosing a car in a lower insurance group.
Buy a car in a low tax band
Vehicle tax rates vary, therefore you may want to consider this when thinking of your next car. Cars with a list price over £40,000 are charged an additional £320 a year for the first five years. That’s an extra £1,600 spent on additional taxes over five years.
Even if you’re looking at cars with a list price less than £40,000, keep the tax band in mind because cars with higher nitrogen oxide emissions are charged a larger first payment tax when the vehicle is initially registered. This only applies if you’re buying a new car.
Alternatives to buying a car
The evolution of the peer-to-peer car sharing market in recent years means it’s easier than ever to hire a car for a day, or even a few hours. If you only need a car (or a second car) once a week then you may be better off financially by hiring or sharing a car as and when you need it. Car sharing clubs are great options, especially if you live in a city where these are readily available. Or, consider taking a taxi or an Uber if you only need to travel in a car occasionally.
Spending the £2,000 a year you could save by not buying a car on car sharing or cabs would give you a budget of £40 per ride if you need a car once a week (or £20 per ride if you need a car twice a week).
So, if you don’t need a car every day, then it might make financial sense to put off that car purchase and use car sharing, private car hires or other hire options instead.
For more useful tips on all things car-related, check out our handy car guides.
Ready to hit the road? Make sure you’re covered with our car insurance plans.
This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.