How to Buy a Car

Buying a car is one of the biggest purchases you can make in life.

There is a lot to consider before buying – should you buy a new or used car? How much will it cost? Should you buy through a personal loan? Or hire purchase? Should you buy a car that runs on petrol or diesel? What should you look out for? The car buying process can be tricky. ALA GAP Insurance has put together this guide on how to buy a car that should help to put your mind at ease.

How to find the right car for your budget

Before you can address whether to buy a used car or a new car, it’s crucial to first work out how much you can afford to pay, both for the car itself and for running costs in the long term. Be realistic about what your budget is - overreaching can result in potentially severe difficulties further down the line, especially if your savings are low or you suddenly find yourself without consistent income.

Once you’ve figured out how much you can afford to spend on buying your car, you need to ensure that you have enough money to run it too. This may require some research into the average costs of running used and new cars, with focus on certain models if you have some in mind. Make sure you’re looking at the most recent figures for these statistics when researching. Generally, used cars will cost more to run than new cars. However, the depreciation of a new car will be a lot greater across its first year of ownership. This is worth keeping in mind, especially if you plan to sell your car in the future.

Once you’ve made sure you can afford to both buy and run a car, you can take a more detailed look at models within your budget. Check your local dealerships and garages, car comparison websites, magazines and the advice of friends, family or colleagues to get an idea of which car might be right for you. Take time to consider aspects such as stowage space, the typical distances you’ll expect to be driving, warranties, safety, reliability and how economical your car choices would be.

Should you buy a car through a personal loan or through hire purchase?

Based on your calculations of what you can afford to spend on buying a car and keeping it running, the answer to this will vary. There are pros and cons to each and it’s worth weighing these up before deciding which is right for you, depending on your personal circumstances.

Personal Loans

A personal loan involves borrowing a lump sum from a bank or building society which you repay with interest over a set term. Should you wish to own the car from day one, a personal loan would be an avenue worth exploring as personal loans are not secured against the value of the car. Remember that your chances of acquiring a personal loan are based on your credit history.

Shop around for the best interest rates and annual percentage rates (APRs) between loans to make sure you get the best deal possible should you decide to apply for a personal loan.

Pros

• They can be either for the entire cost of the car or only part of it
• Provided you’ve done the shopping around, they can have a good fixed interest rate if your credit history is similarly strong
• You decide how long the loan period is. However, keep in mind that although the monthly instalments would be smaller on a longer-term loan, the amount you’d be paying in interest would be much higher than that of a shorter-term loan
• You completely own the car while paying off the loan, so you have the option to simply sell the car if you find yourself in financial difficulties (though check with the lender before taking out the loan to make sure that this would be okay)

Cons

• Taking out a personal loan may potentially affect your credit rating, which can raise problems if for example you wanted to take out a mortgage as well
• They aren’t always the cheapest way of borrowing, so always focus on APR and the total payable amount when comparing loans
• You may need to initially wait for the money to be transferred to you

Hire Purchase

With hire purchase, you are essentially hiring your car after a small initial deposit - the car becomes yours outright once the contract has ended. Usually the deposit is 10% of the car’s total value although this isn’t always the case, so be sure to check first before committing. Unlike a personal loan the hire purchase is secured against the car, so make sure you understand the terms and conditions before signing a hire purchase contract.

Pros

• You’d be more likely to get approved for hire purchase than a personal loan if your credit isn’t great
• Once half the cost of the car has been paid off, you may get the option to return the car and stop any future payments
• Interest rates are fixed so you know what you’re paying each month for the duration of the contract
• Like personal loans, there are flexible repayment terms to help fit in with your monthly budget. Again, though, the interest is higher on longer term contracts than shorter ones
• Hire purchase is often quicker to obtain than a personal loan as it is done directly through the dealer. It often takes less than an hour to set up at the dealership if your deposit is already in order

Cons

• If you get into financial difficulties, then the finance company could take your car away as you don’t own the car until your final monthly payment has been made
• The lender can repossess the car without a court order at their discretion until the point where you’ve paid a third of the total amount payable
• Your monthly payments will ultimately depend on your initial deposit and chosen term length, with higher monthly payments accompanying a smaller initial deposit

Be sure to weigh up all your options whilst budgeting to see whether a personal loan or hire purchase is right for you based on your financial circumstances.

Petrol car or a diesel car?

Choosing whether to buy a petrol or diesel powered car depends mostly on your motoring needs. If you find yourself mostly driving on motorways covering a high mileage, then it would be a good choice to go diesel. If your journeys are mostly local with lower mileage, then a petrol car would probably be a better choice. Petrol cars and petrol are slightly cheaper than diesel cars, but not as fuel-efficient. So, if you were to buy a diesel car, you’d need to work out, based on how much you drive, whether the additional expense in buying the car and diesel fuel would be counterbalanced by the saving in fuel consumption.

There have been vast improvements in the performance and refinement of diesel engines across the last couple of decades, so while there are pros and cons to both petrol and diesel cars the differences may not be as obvious as first assumed. They include:

Petrol Pros

• Petrol cars are generally slightly cheaper to buy than diesel ones and the petrol fuel is cheaper than diesel fuel
• Petrol engines are quieter than diesel ones

Petrol Cons

• Less fuel-efficient; petrol cars depreciate more
• Emit more CO2 than diesel engines, so less green

Diesel Pros

• More fuel-efficient, using around 15-20% less fuel than petrol engines
• Lower CO2 emissions
• Better overtaking and towing power due to a lower-speed torque
• Diesel cars have a slightly higher resale value than petrol cars

Diesel Cons

• Diesel cars, fuel and sometimes servicing are more expensive than their petrol alternatives
• Slightly noisier than petrol engines, but this is quickly improving
• Diesel fuel produces tiny particles that in prolonged exposure have been linked to breathing disorders such as asthma

How to negotiate when buying a car

Once you’re at the point where you’re ready to visit a dealer about buying a car, it’s always worth remembering that you can often get yourself a discount whether the car you’re after is new or used – if you’re prepared to negotiate for it. Ultimately, dealers are there to, well, deal, so don’t be afraid to do the same to get what’s best for you. If successful, you could easily save yourself thousands of pounds, So, once you know what you want, take some important steps:

• Do your research before going to the dealer’s. No matter whether you’re buying new or used, going in prepared is vital. If buying a used car, browse the market to see what price similar cars are selling for. Once you have a valuation, decide what the maximum you are willing to pay before visiting the dealer. If buying a new car, make sure you know the list price of the car you want. It’s also worth checking deals on the car being offered by rival dealers to the one you’ll be visiting as they could potentially be used as bargaining chips during negotiations.
• Start at a low opening price. When buying used, open with a price on the lower end of the spectrum from the prices you’ve found from other cars on the market and let them negotiate you up to a price that you’re both happy with. When buying new, remember that many car industry sales targets are set on a monthly basis. It’s recommended that you visit the dealer near the end of the month where it’s possible that the car that you buy or don’t buy could be the one that makes or breaks their target – leaving the dealer potentially much more open to agreeing to your offer if it means the target will be met.
• Don’t be afraid to walk away. If the dealer – whether new or used – refuses to make a deal with you that you are happy with, remember there is absolutely no obligation to buy right then and there. There will always be another car and there will always be another deal.

One advantage to buying used cars over new is that negotiations can be easier due to the bargaining ability you’ll have over the car’s condition. Examples such as damage to the car’s body, technical faults, the state of the tyres and an incomplete service history can all be used to your advantage to get a great deal. Keep in mind though that buying a used car from a dealer as opposed to privately is less risky as you have more consumer rights should any serious faults develop in the car later down the line.

Remember to remain calm and friendly, yet steadfast with your offers to the dealer. Don’t get charmed by special offers; take your time to evaluate whether they’d be right for you and whether they’re as good as they seem.

Checking and test driving a used car

If you’re buying a used car, you want it to work properly. Failing to identify any faults with a used car before you buy it could lead to a string of potentially expensive problems in the future. Used cars being sold privately are usually “sold as seen”, so checking that everything works as it should do is very important. When test driving a used car, be sure to check for the following:

• Watch out for excessive white, black or blue smoke from the exhaust when the engine is revved. This is a sign of extreme internal engine wear and could indicate other danger signs.
• Check the condition of the car’s tyres, specifically the amount of tread depth remaining and sidewall damage. Any uneven wear, particularly on the outside or inside shoulder of a tyre, could be a sign of wheel misalignment.
• Inspect the bodywork and underside of the car for rust and any chips, scratches or dents. Apply this to the windscreen too; any chips or cracks could cost hundreds of pounds to fix later.
• Make sure the steering wheel can rotate smoothly from lock to lock without any irregular noises, juddering or vibrations.
• When test driving, brakes should feel responsive and the stopping distance when applied should feel natural for the speed you are travelling.
• Check that all electrical components of the car work properly, such as the windows, the air conditioning, sun roof and seats (if applicable) and stereo system.
• Ensure seats are easily adjustable and lock into place properly once moved.
• Check the condition of the engine using the dipstick and by inspecting the inside of the oil filler cap. If there is a thick white substance or brown sludge, walk away from the offer because there is serious engine damage that will be very expensive to repair.
• The gears should engage smoothly without any grinding with the clutch fully depressed. A weak or overly stiff clutch pedal could be a sign of worn components. Make sure you test ALL the gears.
• Open and close all the doors, bonnet and boot to make sure they work correctly. Check the rubber seals and keep an eye out for signs of flaking paint or rust that could denote repairs made after crash damage.
• Ensure that you can check all the necessary paperwork for the car and that they are genuine, namely the V5C registration certificate (logbook) and the Car History Check. If the seller cannot or refuses to show you these articles, walk away from the deal.

Checking and test driving a new car

Although there should ideally be no hidden faults when buying a new car, you can never be too careful. That’s why it’s just as important to check and test drive a new car as it is for a used car. As this step will usually come after or during negotiations with the dealer, make sure you’re test driving the car that YOU want to test drive. Some dealers will try to put you into a higher-spec (and higher priced) car to try and ‘upsell’ you so request the engine, transmission and trim level that interests you. If that specific model isn’t available, focus on finding one that most closely matches your ideal engine and transmission, as those will have the most impact on your driving experience during a test drive.

Essentially, the point of a test drive is knowing what to look for so you feel confident in your choice to buy the car – or not to buy it, if that ends up the case. You’re likely to be given anywhere between 20 minutes to an hour to test drive the car, so here are some things to consider and look out for in that time:

• If possible, test drive the car through a familiar yet challenging route covering various road types. This way you’ll be able to focus on how the car performs around corners and the like instead of finding your way around.
• Bring a friend or family member on the test drive with you to talk to the salesperson in the car so you don’t feel like your every move is being scrutinised. It’ll also be useful to get a passenger’s feel for the car’s performance.
• If you find yourself on a motorway or dual carriageway, try overtaking to check for any blind spots and the efficiency of acceleration.
• Try to go uphill during your test drive if possible – it can reveal a lot about the car’s performance capabilities.
• If the car has built-in touchscreen technologies i.e. sat-nav, ask the salesperson for a quick tutorial to make sure it’s easy to use.
• Is the car comfortable? If not, is it easily adjustable so that it is?
• Are the back seats spacious enough for the passengers you’re likely to have sitting there? Is there enough room in the boot for your stowage needs? Do the back seats fold down easily if needed?

If these things and other personal requirements are fulfilled and you decide to buy the car, make sure to do a few final checks, akin to those you would perform on a used car, once it is delivered to you. Check the car’s paintwork and the lines and gaps around the panels to make sure they’ve been fitted properly. Check the mileage – unless the car had to be driven to the dealer then it shouldn’t display anything above 25 miles. If there are any faults or material defects you notice on the car, then write them all down and contact your dealer immediately. And, of course, make sure you receive all the correct paperwork such as the manuals, service history booklet and V5C vehicle registration certificate (logbook).

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