When buying a new car, many people are tempted by the myriad of finance offers which dealers present them with. Finance deals offer the promise of the car of your dreams at a reasonable monthly price, and can seem like the most affordable way of buying a new car – particularly if the reason for purchase is the demise of your previous vehicle and a new one is needed in a hurry. Other loans other than those offered by car dealers are also often considered a viable option – a loan from your bank or other credit company may offer a lower APR and therefore reduce the payment period or amount paid overall.
However, both of these scenarios leave you with a debt which must be repaid, tying you into a financial agreement which may cause difficulties further down the line. Whilst the monthly payment may not seem like a large amount, interest payments and the long repayment periods (sometimes up to five years) can mean you’re paying a lot more for your car than you need to. A better option if you want to buy a car which you can afford is to pay upfront for a suitable second hand car. Although the initial outlay may appear greater, the amount paid out overall will be smaller and you will not spend years in debt.
The first thing to do when buying a second hand car is to set yourself a budget. Be realistic at this point about what you can afford, but also the kind of car that you need. Purchasing a cheaper car now may mean that you need to replace it sooner or shell out more for repairs, so it may be worth paying a little extra at the beginning. At this stage, it is also important to shop around and see what you can purchase for your budget and what the market value for your favourite cars will be.
Making a list of your must-haves will help you narrow down your search. Do you need a family car with a lot of storage space? Is fuel economy your main priority? How many miles will you be travelling on a regular basis – do you need a nippy little number for driving through a city or something sturdier for long motorway trips? Once you have a list of your essentials, make a list of the ‘extras’ that your new car would ideally feature – a good stereo, leather interiors and air-conditioning might be on this list. When searching for your new car, focus on which of your essentials you can get for your budget, before considering all of those little extras.
Buying a car which you can afford doesn’t need to mean compromising on your dream car. Rather than paying car finance, set up a standing order into a savings account for the amount you can afford; this means that when you come to buy a new car, you’ll be in the perfect position to purchase the car that you want without being in debt.