06 February 2015

Buying your first car

Buying your first car can be an expensive, not to mention confusing process. Here’s a guide to some of the things to think about.

What makes a good car?

When picking your first car it's important you prioritise two things; what will you be using the car for and your budget. Using this as a starting point should help narrow down your search. For example, if you're only going to be driving short distances you may be better suited to a smaller 'city car' with a smaller engine. For more on what to look out for when buying a used car see our guide.

How will you pay for your car?

Existing savings

If you have savings, you could use these to pay for your first car, or as a deposit for it. But remember: using all of your savings could make things difficult if you need some emergency money after paying for your motor. Looking for savings inspiration? We have some hints to help you make the most of your savings.

If you don’t have savings, or don’t want to use existing savings to buy a car there are other options:

Car finance

There are a variety of car financing options. 3 of the main ones are:

  • Hire purchase – hire purchase (HP) sees you pay for a car in monthly payments over a set period of time. Depending on the type of deal you could have to pay a deposit too. Unlike taking out a loan and buying a car instantly, with HP you don’t own the vehicle until you’ve made your final payment.
  • Leasing – renting a car for a set period. Your monthly payments are usually determined by how long you want the vehicle for and your expected mileage. At the end of the agreed leasing period, the car is either handed back, or you may have the option to purchase the car.

Alternatively you may look at taking out a car loan; borrowing money from a bank or building society. Taking out a personal loan means you could buy a car outright and own it straightaway, unlike some other finance options. Before taking out any of these finance options, ask yourself:

  • Can you afford the monthly payments? It may be worth getting some no - obligation quotes to see whether you can afford a loan.
  • Are there any stipulations that might incur extra charges?
  • Do you want to own a car outright?

Other costs

As well as paying for your first car, by law you’re required to pay for:

  • Car insurance – 3rd party insurance is the legal minimum. (This will cover you for the other drivers' damages if you have an accident, but not repairs to your vehicle.) 

  • Car tax – determine your car’s tax rate using the Government’s vehicle tax calculator. Electric vehicles are exempt.

  • MOT – you are required to keep your car in roadworthy condition. 

Don't forget- you'll also have fuel and maintenance costs to think about!

Ways you can keep motoring costs down

After paying for your car you’ll want to make sure you keep motoring costs down as much as possible. Cut your car tax by choosing a low CO2 vehicle – vehicle tax for cars registered on or after March 1st 2001 is determined by carbon emissions and fuel type. If you need to know more, you can calculate vehicle tax rates via the HMRC website.

You should also inspect your car regularly and keep up with everyday maintenance to avoid any costly trips to the garage building up.

Looking for a car loan or  car insurance? See if Nationwide can help.

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