Britain’s sophisticated car market gives us a wealth of options in terms of model type, size, fuel, and finance method. It can be confusing to sift through it all to find your perfect car, but it doesn’t take long to figure out what works best for you and that’s where this guide comes in.
You’ll already know what you want from your car, so here we show you how to find the perfect model, while keeping a lid on the bills.
What car to go for?
The golden rule is the smaller the car, the cheaper it is to buy and run. They are less complicated, need less fuel to haul about and hold their value better.
They’re also cheaper to repair and to insure. Cars such as the Ford Fiesta are a whole lot safer to drive these days than the flimsy tin boxes of old. They’re more comfortable too, especially on long journeys.
However, one important thing to consider is that car makers share a lot of parts between brands to save money. That means, for example, there isn’t a lot of difference technically between a Volkswagen Golf hatchback, a VW Tiguan SUV, a Seat Leon hatchback or a large Skoda Superb estate. They are all built by the VW Group and all use the same platform underneath, just raised a bit or stretched a bit.
The biggest difference is usually in the design. This means if your preferred VW Golf is looking expensive, then a similarly sized Seat Leon or Skoda Octavia, for example, might be better value.
This way, if you don’t care too much about the brand, you can still buy a well-made vehicle that does pretty much everything a more ‘premium’ car might. Skoda is the perhaps best example of this – all the VW expertise, with a good saving on the price.
Also see our tips on how to buy a used car.
Britain’s most reliable car brands
Source: Warranty Direct reliability index. Based on the number and cost of warranty claims, October- December 2017
Petrol or diesel?
This decision used to be a no-brainer. If you’re doing more miles in a bigger car, then a frugal diesel was the fuel to go for. Local miles in a small car? Then choose petrol. But diesels are currently in the naughty corner for their dirty tailpipe emissions, and manufacturers are struggling to clean them without a great deal of expense (or cheating). Diesel cars still accounted for just under half of all UK sales last year, despite slipping slightly against petrol and hybrid/electric cars.
Last year, the government signalled that diesel cars may be taxed more in the future than they are currently to penalise their emissions. And cities such as London are talking about penalising or even banning diesel cars within their centres. Both would make them more unpopular to secondhand buyers, killing their value. Small but powerful petrol engines are increasingly being successfully fitted to larger cars, for example the 1.4-litre turbocharged unit in the new Audi A4. Its maker claims economy of nearly 60mpg, getting close to diesel.
Realistically, however, you won’t see anywhere near that figure. Fuel consumption on turbo petrols can rise dramatically unless you’re very gentle. Diesels are still reliably more economical, meaning the old rule still stands for now: diesels remain the best option if you want a larger car and will travel the extra miles to offset the extra cost with Hybrid or electric? Electric cars are becoming more viable for a one-car family as the range increases.
The two most accessible electric cars, the Nissan Leaf and Renault Zoe, have both had their battery output increased to travel further on a single charge. The new range-boosted Zoe supermini will travel up to 178 miles, compared to 96 miles for the standard car.
Electric cars are not popular enough secondhand to hold their value well, so buy with a PCP (personal contract purchase) with a guaranteed future value or lease it. Renault currently has the longer-range Zoe available on a PCP offer of £269 a month for three years with a £2,000 deposit.
The deal includes a free charging box that will be fitted to your garage or the side of your house, but you need a driveway for the latter option. Bank on your electricity bills going up by around a third, but you’ll save compared to the cost of fueling a conventional car. The Energy Savings Trust estimates fuel costs of between £2 and £3 per 100 miles for an electric car, compared to between £9 and £13 for a conventional vehicle.
They also attract no road tax. Hybrids come in regular or plug-in varieties, with the latter charging 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 is 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 £20,895 for the Active Hybrid. It is more pricey than the petrol version (from £16,495) but, unlike diesels, hybrids thrive on short journeys, where the battery is topped up by regular braking, so they can return phenomenal fuel economy.
How to finance: PCP or lease?
Pretty much all of us finance our car purchases now. Last year almost nine in 10 (87%) of all new car sales to private buyers were financed in some way, according to the most recent data from the Finance and Leasing Association (FLA).
Three-quarters of those finance sales are made using a PCP. This differs from straight hire purchase in that you are deferring a chunk of the price over two, three or four years. You can pay that deferred chunk at the end of the agreement or give the car back. That way, the monthly payments are much reduced.
However, the idea is that you overpay each month and the dealer estimates the drop in value of your car from start to finish of your finance agreement. The dealer should then give you back enough money to help you pay for the deposit on the next car you buy, or you can keep the cash.
It is worth knowing that because it is your car (unlike with leasing), you can also sell it privately when the agreement ends and pay the dealer back that way, and it is worth checking places, such as WeBuyAnyCar, for their valuation before going back to the dealer, which might not be so generous.
An example of a PCP deal is one offered currently by VW for a base Up! city car. The payments are £99 a month over four years with £2,484 down and 10,000 miles allowed a year. After four years, you can pay £3,310 or hand it back.
There is no easy place to check current PCP deals other than manufacturer websites, but if you know what car you’re looking for Askaprice.com will put your request out to dealers for their best price (for leases too).
When it comes to hire purchase (buy outright, pay monthly), this has fallen to just 14% of sales, while just 2% of new buyers used personal bank loans. One trend is the rise of leasing, which now accounts for 8% of all purchases, a jump from 6% in 2015, according to FLA figures. Leasing, also called private contract hire (PCH), is essentially long-term hire.
You pay a deposit, usually the equivalent of three or six monthly payments, and sign up to monthly payments before handing it back under the agreed mileage limit. As with PCPs, there are often deals to be had because manufacturers can tempt people in with cheap monthly payments without advertising they are in effect cutting a huge chunk off the list price, which generally plays havoc with the car’s resale value.
You can compare lease prices on Contracthireandleasing.com or Whatcar.com, but don’t forget to tick the box for personal leasing, so you know the VAT has been added. That is not always a given because leasing started out as a way for businesses to finance fleet cars.
As with PCPs, prices aren’t as good as they were before the pound lost much of its value against the euro in July last year, and many leasing companies are asking for a higher upfront payment. But they can still be surprisingly good. For example, a recent offer from a franchise dealer had a Skoda Octavia Scout 2.0 TDI DSG auto for £159 a month over two years at 10,000 miles a year with £2,490 upfront.
That is £6,306 over the two years, or 21% of the £29,450 list price. Anything under 25% is considered good. You won’t pay road tax, and you’ll be offered a deal on servicing (or it is sometimes thrown in for free).
Monthly prices can be better than PCPs because you’re paying VAT on just your monthly payments and initial payment, not the price of the whole car, as you are with a PCP. You’ll pay if you go over the mileage allowance, but that can range from 7p a mile to over 20p – so do check.
Some people might feel more comfortable leasing from a main dealer, but the many leasing companies that have sprung up recently are essentially repackaging manufacturer deals. Just make sure they’re registered with the BVRLA (the trade body for the vehicle renting and leasing sector).
What about depreciation?
We all know some cars hold their value better than others. We asked used-car pricing expert CAP to come with the list of the top 10 cars that held their value best, and those that made the list (see far left) included premium cars such as the Audi A5, sports cars like the Lotus Elise and Toyota GT86 and SUVs like the Mazda CX-5, Jeep Wrangler, Audi Q5 SUV and Subaru Forester.
But even cheaper brands can hold their value – in sixth place was the higher Stepway version of the budget Dacia Sandero, which retained 52% of its average new price of £10,140 after three years and 30,000 miles. A higher resale price means better finance deals, so a new premium car could be more affordable than a more mainstream car.
For example, on Contracthireandleasing.com we saw an Audi A4 Avant estate with a 1.4-litre petrol engine being offered by an Audi dealer with a lease price of £261 a month plus an initial rental price of £783. Meanwhile, one of the best Ford Mondeo estate deals offered by a Ford dealer on the same site pushed up the monthly fi gures to £292 with £875 up front, despite having a similar engine and spec to the Audi, and with the same twoyear/ 10,000-a-year mileage contract.
Should I buy secondhand?
The cheapest secondhand car to own is usually the most reliable. A useful resource 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 Daihatsu, Honda, Suzuki, Toyota and Mazda (all Japanese), with Bentley, Land-Rover, Porsche, Chrysler and Alfa Romeo at the bottom. Bear in mind data is taken from older cars, so makers might have pulled up their socks on newer models.
When servicing a secondhand car, aim for a decent independent. Franchise dealers typically charge double those of independent specialists on labour rates, and are more like to replace parts than hunt for the cause of the problem. It is no longer the case that you have to pay cash or use a bank loan. Buyers are increasingly turning to dealer fi nance offers, including PCP, to buy used cars. Last year, 40% of used cars bought from franchised dealers were bought this way, according to figures from the FLA in the 12 months to the end of September – up from 37% the year before. Hire purchase remained the most popular route to finance with 55%, while just 4% were purchased off the forecourt using a bank loan.
Read our tips on how to buy a secondhand car.
What about insurance?
It is important to shop around to get the best deal. 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. Many insurers give you the option to auto-renew, which makes life easy but also more expensive.
From April 2017, insurers have to print last year’s premium on your renewal documents, so you can see if you’re paying more or not. But still compare prices with other companies.