| Car shopping can be very stressful. A wrong decision | | | | you don't actually own the car you just pay a monthly |
| can have far reaching negative consequences that | | | | fee to keep it for a period typically between two to |
| affect people's lives. Therefore, car shoppers should | | | | five years; and, (b) Lease/Buy (also known as contract |
| consider all options before signing a contract. The | | | | purchase), you pay a monthly fee to keep the car but |
| following provides an explanation of some of the most | | | | you have the option to buy the car at the end of your |
| important steps that a car shopper should consider. | | | | contract (for a price agreed at the time of signing the |
| Step 1 - Make A Decision on Car Type | | | | original contract). |
| A decision on car type is an obvious starting point | | | | Therefore, the decision that must be made is whether |
| which should be directed by your 'needs' as a car | | | | or not you want to own the car. To do this you need |
| shopper as opposed to your 'wants'. If you let 'wants' | | | | to consider the benefits of car leasing vs car buying. |
| direct the needs, this can lead to an expensive | | | | There is an enormous amount written on this and |
| mistake. If you are a car shopper and you want to | | | | great debate as to which is better. However, there is |
| understand your needs, these mostly evolve around: | | | | no correct answer and depends on the circumstances |
| 1. Engine - the most dominant factors in this is are the | | | | of the car shopper. Nevertheless, the benefits of each |
| fuel type (diesel engines are more efficient than petrol) | | | | are: |
| and the size of the engine (which determines the | | | | Benefits of Car Leasing vs Car Buying: |
| power for speed and acceleration); | | | | 1. Businesses avoid at least 50% of the cost of VAT |
| 2. Transmission - there is one of three options, manual, | | | | (if they use contract hire); |
| automatic or semi automatic with automatic being an | | | | 2. No large upfront deposit; |
| option for those that like to avoid changing gears | | | | 3. You obtain a more prestigious vehicle for less |
| because they spend a lot of time behind the wheel. | | | | money (sometimes as much as 60% less); |
| Automatic vehicles are most often less fuel efficient | | | | 4. You update your car every 2 - 4 years; |
| than manual vehicles; | | | | 5. You avoid the stress of buying and selling as the |
| 3. Size of the vehicle - what will be the average | | | | new vehicle is delivered and the old one is picked up |
| number of passengers seated in the vehicle for most | | | | by the leasing company. |
| journeys and is there a requirement for additional | | | | Benefits of Car Buying: |
| space? | | | | 1. There are no contractual restrictions such as |
| 4. Likely Usage - how frequently and how far will the | | | | penalties for excess mileage or wanting to change a |
| car be driven each week? If it is a company car then | | | | car earlier than expected; |
| the chances are that it will generate a lot of miles on | | | | 2. If interest rates are low and the vehicle is one that |
| longer journeys quickly. However, if it is a family car | | | | depreciates quickly (some cars depreciate as much as |
| that is required for school runs and grocery shopping | | | | 40% in the 1st 12 months) it might be best to buy the |
| then there will likely be a large number of short | | | | car. |
| journeys. For cars on long journeys the engine size | | | | Step 4: What are the costs of ownership of your |
| and transmission type become important to optimise | | | | preferred car? |
| efficiency. | | | | It is wise to consider the costs of owning a vehicle |
| Step 2 - What Is Your Monthly Budget? | | | | over the entire life of the vehicle. For example, there |
| If you are not buying a car with cash and are looking | | | | could be two cars that you are looking at and one is |
| to use car finance (hire purchase, car leasing or car | | | | cheaper to buy than the other. However, the cheaper |
| loan), once you have made a decision that narrows | | | | car might actually cost you much more over the entire |
| down the car type, the next critical decision is to | | | | period that you have it rather than the one that is |
| decide on your budget for monthly car payments. A | | | | more expensive upfront. Costs that you should |
| general rule is that your total monthly payment | | | | consider are annual road tax, fuel and maintenance |
| shouldn't exceed 20% of your net salary (ie; your take | | | | costs, insurance and depreciation (depreciation is not |
| home pay) per month. | | | | an issue with car leasing) |
| Step 3 - How Should You Finance Your New Car? | | | | Step 5: How To Find The Best Car Prices |
| The four most common ways to finance a new car | | | | By now you should have a short list of at least your |
| are by paying cash, by using hire purchase, taking out | | | | top 3 vehicle choices with your number 1 option being |
| a loan with a finance company or by leasing the car. | | | | the most cost effective. However, you now want to |
| These four different finance options can be | | | | understand how to find the best price for your |
| categorised in to two main groups of car finance: | | | | preferred vehicle. The fastest way to determine the |
| 1. Those with which you ultimately take ownership of | | | | cheapest price for your new car (whether you are |
| the car (paying with cash, car loan or hire purchase - | | | | buying or leasing) is to use the internet. There are |
| with hire purchase you don't own the car until your final | | | | many different types of car websites that compare |
| payment); and, | | | | the cost of cars and the cost of car finance. You |
| 2. Those with which you don't own the car unless you | | | | should spend some time looking at these and by doing |
| opt to buy it at the end of the finance period - car | | | | so locating what is the cheapest and what is the |
| leasing. There are primarily two types of car leasing: | | | | average price. |
| (a) An operational lease (also known as contract hire), | | | | |