Buying a car is one of the biggest purchases you will make so it’s important that it’s the right choice for you and your budget. Unfortunately though, once you’ve bought or financed the car, the payments don’t stop there. There are a number of costs associated with running a car too. The guide below looks at how much it could cost to own and run and car and how to budget for your next vehicle purchase.
Ways to buy a car
When it comes to buying a car, there are a few options you have. Whether you’re looking to purchase a car with cash or spread the cost with finance, it’s worth comparing both first.
Cash: When it comes to buying a car, cash is king. There are no additional fees to pay, you own the car straightaway, and you have more freedom when it comes to negotiating prices. The only stumbling block for buying with cash is that both new and used cars can cost thousands of pounds to buy. The cars you can buy may be limited by budget and it may mean you have to choose an older car to be able to afford to buy with cash alone.
Finance: Choosing to buy your next car on finance means that you can get a car and pay for it in monthly instalments. Your monthly payments will include any additional fees and interest and they can be spread over a number of years. You can get an idea of how much car finance could cost by using a car finance calculator UK to set your budget and loan term. Usually, you won’t own the car until the final payment has been made at the end of the deal and during this time it will instead belong to the lender. Car finance can be harder to obtain if you have a poor credit score and it’s always worth remembering that no car finance company can guarantee finance to everyone.
Deposit contribution: If you choose to go down the finance route, you should also consider the cost of a deposit at the start of your agreement. Whilst there are many cheap car finance deals with no deposit needed, it can be a requirement of some deals so it’s worth keeping in mind. A deposit contribution can also help to lower the loan amount as you are putting money towards the deal. This means you don’t have to borrow as much which can be favourable in the lender’s eyes. A lower loan amount can help to make your monthly payments more affordable or help you pay off your finance faster.
The cost of running a car
Once you’ve got the vehicle you want, it’s time to start thinking about how much your new car is going to cost to run.
Fuel costs: Depending on which type of fuel source you’ve chosen and how often you drive; your running costs will differ. Diesel cars tend to cost more to refuel but they can provide a higher MPG which means you are helping to save money. However, they are only as efficient when driven for many miles and won’t be as cost effective for short city journeys. Petrol cars tend to be cheap to buy and cheap to run and also is the most dominant fuel type amongst UK drivers. Electric cars can be the cheapest to recharge when compared to the price of petrol or diesel, but many drivers are still put off by their shorter electric range.
Road tax: Road tax is a legal requirement for all cars in the UK and your vehicle will need to be taxed even if you are exempt from paying any money. Road tax rates are calculated by the cars fuel type, CO2 emissions and engine size. There are a number of road tax bands and different cars will fall into different categories, meaning they will cost more to tax than others.
MOT and servicing: Under UK law, each and every vehicle needs a valid MOT every year once it is 3 years old. A MOT helps to prove that the vehicle is road worthy and can’t be driven until it passes an MOT test. The average cost of an MOT in the UK is around £50 and will need to be paid each year that your car is on the road. Alternatively, there is no legal requirement to have your car serviced but it is recommended. A car service helps to keep your car in a safe, reliable, and fully functioning condition and should be performed every year or every 10,000 miles, whichever comes first. Servicing costs can vary based on the type of service you choose. For a basic service, the average cost is around £60 to £70 but a major service can set you back around £200-£400.
