How Do I Afford A Car?
For many people, buying a new car appears out of reach. They see ads for vehicles they like, but they don’t see themselves driving the car of their dreams because of cost – they think they cannot afford the car. If this applies to you this article might have some answers, as owning a new car is not as expensive as you think.
This fact is one of the main drivers of the increase in new car sales and registrations. But how are all these people able to afford to buy a new car? Here are some options, and some tips.
Work Out Your Budget
This is the most important part of the process and should start before you even look at the range of models, or the options that are available. There are a number of things that you need to look at:
- How much do you have as a deposit?
- Do you have a car to trade in or sell, and how much is it worth?
- How much of a monthly payment can you afford?
By doing this you will see the range of vehicles that are within your reach – you might be surprised at what is on the list.
Look At the Running Costs
Once you have chosen a car that appears to be within your budget you need to look at the running costs. Running costs have to be factored in to your monthly budget as much as the costs of any finance deal you might enter into. And you will have running costs even if you don’t take a car on finance.
Things that you might have to consider, based on your circumstances, include:
- Fuel costs
- Maintenance costs (tyres etc)
- Motor Tax
- Annual depreciation and estimated resale value
Remember when looking at these costs that not all cars are the same. Some will offer better fuel efficiency, for example. Depreciation is another major variable as most other brands of car depreciate much faster than BMW cars.
Your Finance Options
There are several different ways that you can pay for your car, but this article looks at the main options.
The first is to pay by cash using your savings. This is the often the cheapest option over time, but it is also the option that is beyond most people, particularly when they are looking at buying their dream car.
If paying cash is not an option you will need to look at some form of finance. You can go to your own bank to take out a personal loan to cover the cost of the purchase, or you can opt to get a hire purchase agreement. There are differences between the two options, but they both offer you the ability to buy a new car and pay it off over a set period of time.
PCP (personal contract plan) is another option you have available. This is attractive to many motorists because the monthly payment is usually lower than it would be if you took out a loan or hire purchase agreement. There are three elements to the deal – the deposit, the monthly payment, and the guaranteed future value of the car. So, compare this with a hire purchase agreement – a hire purchase agreement takes the total cost of the car minus the deposit, and finances this amount over of the agreed period of time. A PCP agreement finances the total cost of the car minus the deposit and minus the guaranteed future value. As the finance amount is less, the monthly repayments are lower.
Under PCP deals you don’t own the car outright, but they do make driving your dream car more realistic because of the lower monthly payments. Find out more by contacting us at Martin Reilly today.