new car

What You Need To Know When Buying A New Car

The new ’66’ plate will be released on September 1 and if you’re looking to treat yourself to a new car here’s everything you need to know.

Needs over wants

The first thing you really should be considering is why you need a new vehicle.

Do you need a decent run around to get you from A to B, upsize to a family model due to a new arrival or downsize now the kids have fled the nest?

Once clear on what you need the next thing to consider is the running costs, factoring in fuel consumption, insurance costs and road tax charges.

There is little point having a big new fancy car if you cannot afford to run it, so remember to separate the ‘wants’ from the ‘needs’.

How will you pay for a new car?

If you have taken the time to save for your new car then you’re in a slightly stronger position than those looking to use finance.

You’ll avoid having to pay any interest on your purchase, you may also be able to negotiate a discount from the dealership – so haggle away!

However, if you don’t have the cash to pay in full, there are two main options available to you – a personal loan or dealer finance.

When you take out a personal loan, a lump sum is borrowed that needs to be repaid over a set term, plus added interest.

As the loan isn’t secured against the vehicle you’ll own the vehicle outright immediately.

If you go down the dealer finance route, there are three main types you can opt for:

Hire purchase (HP)

If you opt for HP, you will pay a deposit followed by regular monthly payments over a set term. You may be given the option to hand the car back halfway through the term, and the car would only actually be yours once the payments have been made.

Personal contract purchase (PCP)

PCP requires you to pay a deposit then make monthly  payments based on an agreed mileage and the depreciation of the car.

Once the agreement has finished you can give the car back and walk away, or you can pay a lump sum so you own the car.

Personal contract hire (PCH)

PCH is an agreement where you basically rent the car over a long-term period. You pay a deposit  and make monthly payments until the end of your contract. Once the contract finishes you hand the car back.

What about my old car?

If you have an old car to get rid of and you don’t want the hassle of a private sale yourself, you could use a car buying service or part-exchange your car at the dealership where you’re buying your new car.

What happens with my insurance?

If you plan to sell or part-exchange your old car before you buy your new one, it is vital you inform your insurer.

You can either amend your existing policy so your new car is covered, or cancel it and take out a brand new policy.

Amending your policy usually incurs an ‘admin fee’ to change the details and your cover could also increase if the insurer sees your new vehicle as a greater risk of theft or accident than your old one.

If you cancel your policy, you’re likely to be charged a cancellation fee and will only get back a percentage of your total premium, the combination of which could leave you significantly out of pocket.

You will also lose any no claims discount entitlement for the year that policy was running.

Should I take gap insurance?

It’s common knowledge that new cars lose their value quite significantly in the first two years they’re on the road – 20% disappears immediately through VAT – so gap insurance is designed to cover the difference between the amount you paid for the car and the amount your insurer will pay out as a claim once depreciation has been taken into account.

For example, if you buy a new car worth £20,000, you may only get £16,000 from your insurer if you were involved in an accident a few months later.

That would leave you needing to stump up £4,000 of your own money if you wanted to replace your car with a new equivalent model. Gap insurance is designed to cover that difference.

What about my road tax?

You are no longer able to transfer road tax from one vehicle to another when sold, so if you’re selling your car you need to make sure the relevant section of the V5C is sent to the DVLA to notify them of the change of ownership and then you’ll receive a refund on any full  months tax you are owed.

You will not receive the refund unless you inform the DVLA so make it a priority.

Once you have your new car you can tax it online, by calling 0300 123 4321, or in person at your nearest Post Office that deals with road tax.

Have you got any good tips when buying a new car?

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