9:45 a.m. September 23, 2022
Once upon a time, buying a car was easy: an often enjoyable, if occasionally tense, lesson in the art of negotiation.
The aim of the buyers was to try to find out for how much less than the price displayed on the windshield of the vehicle they could acquire it. Meanwhile, the dealer knew how much wiggle room there was in the price and would try to justify it by highlighting the attractive features of the vehicle.
As an occasional car buyer, I was told that there are two keys to success: investing time in the negotiation process, a strategy that may require a later visit to continue the negotiation; and never fall in love with the car; be prepared to walk away from the deal.
How times have changed. Today, selecting a new car is easy. Financing it has become considerably more complicated, especially as interest rates have been gradually rising.
A quick check online shows that the interest charged on auto loans typically runs between 11% and 19.9%, although one well-known high street bank charges borrowers as high as 29.9%. Interest rates may have increased recently, but they have only gone up to 1.75%, not 20%.
Britons enjoy a complex relationship with cars, not least because it’s likely to be one of the most expensive purchases we’ll ever make. However, obsessing over the price of a car is perhaps the biggest and most costly mistake buyers make.
People often buy a car and think that’s the end of the matter, even though their new vehicle will often cost considerably more than they planned to spend. For starters, there are costs for maintenance, technical inspection, insurance, fuel, parking, and regular cleaning, yet too many people don’t have a realistic idea of how much more it will actually cost to own.
Online car experts say you should never spend more than 10% of your annual gross income on a car, thanks to the long list of additional expenses you’re virtually guaranteed to incur.
Adding to this are maintenance costs and the like that will put a hole in your bag or wallet. In fact, the more often you’re behind the wheel, the higher your maintenance bill will be. Since a vehicle is made up of thousands of moving and fixed parts, it’s almost inevitable that one or more will eventually break, leak, or require an expensive upgrade. I recently spent £400 on two new tyres, around £150 more than I had anticipated.
As interest rates continue to rise, buying or leasing a car becomes more expensive and there is no sign of rates suddenly dropping while inflation remains a threat. In addition, the pleasure of buying a car -it does not have to be new- disappears after a while, although paying for it is a process that usually lasts years.
“Given how quickly prices are rising, it’s important that motorists take the time to cut car-related costs wherever they can,” says Ken Carter, head of Insurance Services at personal finance website Moneymapp.com. .
“As the cost of fuel skyrocketed over the summer, we saw how careful many drivers became in a successful attempt to save fuel. But while motorists can put spending on small luxuries like valet parking on hold, they can’t avoid fixed costs, including car taxes or parking tickets,” he adds.
Annual car insurance costs are another matter, because they can be reduced.
Carter points out that since the Moneymapp platform reviews the cost of car insurance across more than 100 insurance companies on behalf of everyone who logs in for an instant quote, motorists can enjoy savings of up to £319.03 on your annual insurance costs.
“We don’t ask for your mother’s maiden name, inner leg measurement, or any other nonsense when you visit Moneymapp; we just want drivers to get the best auto insurance quote possible. It’s that simple,” says Mr. Carter.
I wish everything about car ownership was so easy.
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.