Whether you’re upgrading your current car, replacing an old car or simply looking for something that better suits your lifestyle, buying your next car is a significant financial decision.
It’s easy to get caught up in the excitement of finding the right make, model and specification, but being money savvy means looking beyond the price tag. The decisions you make before and during the purchase can have a big impact on how much your car really costs you over time.
Here are five ways to make your money go further when buying your next car.
1. Look Beyond the Monthly Finance Payment
When you’re considering a car on finance, it’s tempting to focus on the monthly payment. A lower monthly figure can make a more expensive car appear affordable, but it doesn’t necessarily mean you’re getting the best deal.
Before committing, look at the total amount you’ll pay, taking into account the deposit, interest, fees and length of the finance agreement. Extending the term can reduce your monthly payments, but you could end up paying more interest overall.
It’s also important to consider the ongoing costs of your next car, including insurance, fuel, servicing, tyres and other maintenance.
The cheapest car to buy isn’t always the cheapest car to own, so consider the bigger financial picture before making your decision.
2. Shop Around and Compare the Full Deal
Don’t feel that you have to accept the first deal you find.
Take the time to compare different cars, dealers and finance options. When comparing offers, look at the complete package rather than just the advertised price or monthly payment.
If you’re part-exchanging your current car, research its approximate value beforehand so you have a better idea of whether the offer you’re receiving is competitive.
You can also compare the cost of optional extras and additional products. What initially looks like a great deal may not be quite as attractive once all the costs have been added together.
Doing your homework before you buy could save you money and give you greater confidence when negotiating.
3. Consider GAP Insurance to Protect Against a Financial Shortfall
One cost that can catch car owners by surprise is the difference between what their motor insurer pays if their vehicle is written off and what they may still owe on their finance agreement.
This is where investing with Direct GAP (Guaranteed Asset Protection) insurance can be worth considering.
Cars can depreciate over time, and depending on the vehicle, the finance arrangement and how quickly its value falls, you could potentially find yourself owing more than your car is worth. If the vehicle is stolen or declared a total loss, your comprehensive motor insurance will generally settle the claim based on the policy terms and the vehicle’s value at the time of the loss.
If that settlement isn’t enough to cover your outstanding finance, you could be left facing a financial shortfall.
An appropriate GAP insurance policy may help cover some or all of that difference, depending on the type of cover and the policy terms.
It’s important to remember that GAP insurance policies can differ, so always check the level of cover, exclusions, claim limits and eligibility before buying. It can also be worth comparing policies and prices rather than automatically taking the first option offered to you.
4. Think About Your Car’s Future Value
It’s easy to think about what your next car is worth today, but it’s also worth considering what it might be worth when you eventually decide to sell or part-exchange it.
Depreciation can be one of the biggest costs associated with owning a car. Some vehicles tend to retain their value better than others, so researching resale values could help you make a more financially informed decision.
Factors such as mileage, condition, reliability, popularity and specification can all affect a vehicle’s future value.
You don’t need to predict exactly what your car will be worth years from now, but considering depreciation before you buy can help you understand the potential overall cost of ownership.
5. Leave Some Room in Your Budget
Finally, try not to use every penny of your available budget on the car itself.
Owning a car comes with ongoing and sometimes unexpected expenses. Insurance premiums can change, tyres need replacing, servicing may cost more than anticipated and unexpected repairs can happen even when you’ve carefully chosen your vehicle.
Leaving some breathing room in your finances can make these expenses much easier to manage.
Rather than asking yourself, “What is the most expensive car I can afford?”, consider asking, “What can I comfortably afford without putting pressure on my finances?”
That small change in mindset could make a big difference to your overall car-buying experience.
Make Your Next Car a Smart Financial Choice
Buying your next car should be exciting, but it’s also an opportunity to make a smart financial decision.
By looking beyond the monthly payment, comparing the full cost of different deals, considering protection such as GAP insurance, thinking about depreciation and keeping some money aside for unexpected costs, you can give yourself a better chance of avoiding financial surprises further down the road.
Being money-savvy isn’t about always choosing the cheapest car. It’s about understanding what you’re paying for, protecting yourself against potential risks and choosing a car that fits comfortably within your budget.