Get a new car for less
What do you want from your new car? Will you use it mainly for work? Or will it be the family run- around? Do you want something kinder to the environment? Here, we show how to switch your car to perfectly suit your needs while cutting your costs at the same time.
The golden rule is the smaller the car, the cheaper it is to buy and run. They're less complicated, need less fuel to haul about and hold their value better. They're also cheaper to repair and to insure. Cars like the Ford Fiesta are these days a whole lot more safe to drive than the rattly tin boxes of old.
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Car makers are increasingly making small cars ‘big', too. That sounds ridiculous but, to give an example, the Fiat 500L hatchback is based on a small-car platform so isn't that costly to make, yet it still comes with a big 400-litre boot and five-seat space. Not bad for a car that starts at £13,390 and has a bit of personality to its styling as well.
Car companies are also building more supermini SUVs, which keep most of the small-car agility, frugality and cheapness while adding more space and height (a massive help for ease of entry). New cars to look at include the Renault Captur, Vauxhall Mokka, Peugeot 2008, Honda HR-V, Jeep Renegade, Citroen Cactus and Fiat 500X.
The cheapest secondhand car to own is usually the most reliable. A useful resource here is the Reliability Index from Warranty Direct, which uses its warranty data to work out which cars it pays out on most often.
It lists the most reliable brands as Honda, Daihatsu, Suzuki and Toyota (note the Japanese theme) with Land Rover, Alfa Romeo, Jeep and Audi at the bottom. Bear in mind data is taken from older cars, so makers might have pulled up their socks on newer models.
As for servicing a secondhand car, aim for a decent independent. Warranty Direct (which should know) says that, on average, franchise dealers charge £85 an hour (plus VAT) against an independent specialist at £40 an hour. Independents are also better at finding the cause of the failure rather than throwing new parts at the problem.
Petrol or diesel?
If you want to buy a mainstream car and use less fuel running it, then diesel is the obvious choice. But modern diesels with their soot-catching particulate filters don't like a life of shorter, slower journeys because the filter can't properly burn off the soot as it's designed to do.
Diesels are also more expensive to buy and if you're doing fewer miles, it takes longer to recoup the extra money you've spent. Take the VW Golf. The five-door Match 1.6 TDI diesel officially records an impressive 74mpg but costs £855 more than the equivalent petrol, the 1.4 TSI, which records 53mpg. Over 10,000 miles and with diesel costs higher at the pumps, you'll need almost four years to make up the difference. Over 5,000 miles that climbs to almost eight years.
The difference in vehicle excise duty (zero for the diesel versus £110 a year for the petrol) claws back some of the difference but we don't expect the diesel advantage to last much longer. Diesels still put out more localised pollution than petrol engines and noises from government suggest diesels could be penalised in the future.
So if you're planning on keeping the car for a longer time and your journeys are mostly short, the greater reliability and value of petrol makes it the better choice.
Hybrid or electric?
If all your journeys will be short, or you've got access to another car, then electric is a good idea. There are deals to be had now on cars such as the Nissan Leaf, which is reckoned to do 124 miles on a charge and cost 2p a mile in electricity. One main dealer we saw had the Nissan Leaf on a two-year lease deal for just over £200 a month with a deposit of just £135. It'll need off-road parking to charge up but wall-mounted chargers are free or very low cost. The smaller, supermini-sized Renault Zoe is another good option.
Hybrids come as regular or plug-in, with the latter adding a slug of charge from an outside electricity supply to boost the electric-only range to 20 miles or so before the engine kicks in. The Mitsubishi Outlander SUV is the best seller here but it's pricey and heavy on fuel once the electric charge is depleted.
The best regular hybrid is the Toyota Auris, which uses the technology from the bigger Prius but in a good-value package that starts from £20,645 for the Icon Hybrid, and is currently tax exempt. It's more pricey than the petrol Icon (from £17,645) but, unlike diesels, hybrids thrive on short journeys, where the battery is topped up by regular braking, so they can return phenomenal fuel economy.
Buy, or PCP?
Some people prefer to buy their car outright and keep it, possibly until it no longer works. Others like the idea of having something newer and more dependable to hand.
On a fixed income, the idea of a PCP (personal contract purchase) or leasing can work out well if you're in the latter camp. You know what you're spending each month and if something goes wrong, there's the warranty to catch you. Even servicing is covered in increasingly popular packages that are often included for free.
Leasing is essentially long-term hire. You pay a deposit (usually the equivalent of three or six monthly payments) and pay monthly before handing it back under the agreed mileage limit. Remember, it's most cost-effective if you're getting close to that limit, say 6,000 or 8,000 miles a year.
To give an idea of prices, a petrol Golf TSI was up for £237 a month over three years at 10,000 miles a year with six months deposit at one leasing company. You can compare leasing deals at car review site Parkers.co.uk.
A PCP works much the same way but the better deals come from car dealers and there's an option of buying the car at the end of the agreement. These cut the monthly figure compared to straight hire purchase by funding the value drop rather than the whole car, adding some profit on top, of course.
These can be absurdly cheap. For example, Skoda is currently offering a base Citigo city car for £75 a month over three years and 30,000 miles providing you can raise £2,686 as a deposit.
Pay less insurance
It's important to compare how your car insurance stacks up against other policies available in the market each time it comes up for renewal. Sadly, loyalty rarely pays with insurers and unless you compare prices and ask your insurer to price match, chances are your premiums will rise each year – whether or not you make a claim. This means you need to shop around every year to get the best deal. A recent survey by GoCompare found that around a fifth of drivers lets their insurance company auto-renew, while a quarter of drivers have been with the same insurer for three years or more.
Finally, don't automatically think ticking the garaging option will lower insurance. Strangely, it often doesn't. Cars are more reliable for being used regularly and not having to haul the car out of the garage every trip will encourage that. That'll make room for a classic car but that's a whole new area of expense.
How a nicer car can be cheaper
We all know some cars hold their value better than others - a recent survey by car price analyst Glass's found that best of all was the now not-so-humble Mini. The brand had the strongest residuals of the 34 car manufactures selling in the UK. This works in your favour
when selling, of course, but it can also work when buying.
Take that Toyota Auris we mentioned. The 1.6 petrol Icon version costs over £1,500 less to buy new than the hybrid, but take a look at a comparable lease price we found: with identical terms over three years from leasing firm National Vehicle Contracts, the hybrid costs exactly £1 less to lease a month at £229. That's because the leasing firm takes into account it'll be able to sell it for more secondhand and translates that saving into a lower monthly lease price. So the more desirable car becomes cheaper.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.