Buying and running a car

Company car or private car

• If you are offered a company car, do not imagine it is free – you will pay tax on it. The amount you will pay is affected by the cost of the car and any extras, its C02 emissions and the type of fuel it uses. The lower the cost and the lower the emissions, the less tax you will pay. Diesel cars are taxed slightly more highly. Use an online calculator to work our exactly what you would pay for different models with different extras.
• You can reduce the amount of tax you pay by contributing up to £5,000 towards the cost of the car.
• You will also be taxed on any fuel provided by your employer, so only choose that option if you do high personal mileage.
• You might be offered a salary increase instead of a car. Do your sums and see which is best value after tax and National Insurance.

Financing your car

• Cash – save up and buy the car outright. You will not owe anything and will not pay interest but your money will be tied up in a depreciating asset.
• Dealer finance – some offer 0% finance but you might be able to negotiate a lower purchase price if you accept a finance deal with interest added or if you offer to pay cash, either from savings or from a separate loan. If you are offered a dealer loan, check the small print and the interest rate – look at the APR to see what the annual cost will be, including fees and charges.
• Car loan – shop around for the best rates. Whether you are given an offer and at what rates will depend on the strength of your credit rating, as judged by the loan company.
• Hire Purchase – HP means you are hiring the car until the last payment, when ownership transfers to you. You cannot sell it until the HP agreement is settled. Again, look at the APR.
• Leasing – this is another form of long-term hire, generally for two or three years. At the end of the lease, you can hand the car back or buy it for a pre-agreed sum. Any bumps, knocks or scratches will have to be paid for if you hand the car back.

The price is right

• Make sure that you are armed with the latest information about prices and be prepared to haggle.
• Check the internet for deals and offers – local dealers will often match them and some specialist websites match car buyers and sellers.
• Car supermarkets are often substantially cheaper than main dealers.
• Car auctions can give you great deals – but unless you are an expert, take a knowledgeable friend with you to check over any cars you are interested in or hire a professional mechanic. Do not get auction fever and pay over the odds – do your research in advance.
• Private sales – get the car checked by a professional, do an HPI check and do not part with any money until you are sure that everything is legitimate. Be aware that you will have fewer rights if the car goes wrong than if you buy from a company.
• If you are prepared to travel, cars in some parts of the country are cheaper than in others. Some car companies offer special deals for buying to pick up from their factory.

Insurance

• By law, you must insure your car. If it is very cheap, you might want only to take out third party, fire and theft cover – but you will have to pay for your own repairs if you cause an accident or the culprit can’t be found or is uninsured.
• Use price comparison engines to compare insurance prices. Some insurers do not use price comparison engines, so ask them for a quote, too – they can be cheaper.
• Insurance is cheaper if you accept a larger excess than usual – the amount you must find before the insurer takes responsibility for any damage or loss.
• If you pay up-front for a year, you will avoid paying interest on monthly instalments.
• The cost of your insurance will be affected by the type of car you buy, its power, the potential cost of repairing it, your driving experience, where the car will be parked, whether there are points on your licence and how many years’ no-claims discount you have. Some insurers will grant you extra no-claim years to gain your business.
• Consider buying a policy with claims protection. That will allow you to make one or two claims over a set number of years without affecting your no-claims bonus.
• If you only drive a limited number of miles a year, you may be able to reduce your premium – cars driven infrequently are less likely to be involved in accidents.
• Shop around every year– you may find better value if you change insurer.
• If you are buying second-hand and the car is relatively young, consider an extended warranty. If you have bought new, the warranty is about to run out and the car manufacturer offers to extend it for a fee, check to see if you can get a better deal elsewhere – you probably can.

Running costs

• Running costs will take a large slice of your wallet every month.
• Driving more slowly and steadily will save you money – the average car uses 38 per cent more fuel at 70mph than at 50mph.
• You can tax your car online using your debit card, at no extra charge. Go to www.taxdisc.direct.gov.uk
• Check your tyre pressures regularly. Tyre under-inflated by 20 per cent will increase your fuel bill by three per cent and mean that you will be knocking months off the life of the tyres.
• If you have got a roof rack, take it off when you are not using it – it creates fuel-drinking drag.
• Use air conditioning sparingly but run it for at least 20 minutes a week, even in winter, to avoid repair bills.
• Do not fill the tank but instead visit a garage more often – fuel is heavy and weight reduces mpg.
• Check fuel price comparison sites but if you intend to keep the car for many years, do not buy cheap fuel – it contains less detergents and additives, which help keep the engine in good condition.

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