Let’s face it, the automotive industry has taken a bit of a battering in the last few years. The economic impact of COVID-19 led to massive production delays, with the current cost of living crisis meaning consumers are now less willing to make major purchases, preferring to wait until the coffers are replenished before taking the plunge.
Accordingly, used car prices skyrocketed in 2021, rising by almost 70%. They are predicted to remain high in 2022, with Auto Express Magazine predicted earlier this year that ‘’used car prices are here to stay’’.
All of which leaves the consumer in something of a pickle; do they spend big now on a brand new vehicle, or do they wait until used car prices fall? For savvy shoppers, there is a third option; finding a good deal on a used car now. Here’s how to do just that…
Before you make any large purchase, it’s vital to take both a bird’s eye view and a deep dive of your monthly incomings and outgoings to check if you can make room for it within your budget.
As we all know, times are set to be tough in the coming months, and if you’re going to afford a purchase as important as a new or used car, it’s worth acknowledging that you’re going to belts tightening belts in the coming months.
Your savings goal and budget should be realistic and affordable, whether you’re putting aside a specified sum each month from your incomings to save for your next car, or you’re making room in your budget for the kind of monthly instalments typically associated with used car finance. Speaking of which…
Find The Right Finance Option
If you are choosing to buy a used car on finance, you have a few different options to consider. In short, these are:
- Personal Contract Hire (PCH), which essentially involves leasing a car for a set period. This suits those who like to change the car they drive fairly regularly.
- Hire Purchase (HP). This requires a deposit, usually of 10% of the purchase price, and the rest of that price paid in instalments.
- Personal Contract Purchase (PCP) also involves a deposit, but the instalments you pay are towards the depreciation of the vehicle’s value. When the payment turn ends, you can either return the vehicle to the supplier, take full ownership via a final ‘balloon’ payment, or trade in the vehicle for something different, using any guaranteed future value (GFV) as equity.
- Personal Loan, which perhaps doesn’t need explaining.
If you’re keen to explore these options in more detail, do check out our tips on finding the best finance option when buying a used car.
Factors Affecting Finance
The finance deal that you’re actually offered, in terms of the annual percentage rate (APR), the monthly payment amount, the deposit required, and various other elements that could affect your perception of whether or not you’ve got a ‘good’ deal, depends on various factors.
These include your proposed deposit contribution, your desired length of loan agreement, and, of course, your credit score. Check out these factors which affect the cost of your car finance to learn more about that.
Now that you’ve considered your budget, explored various finance options, and the factors which influence them, it’s time to shop around. Indeed, it’s worth visiting different car dealerships to get a good overview of car prices. You should also consider private sellers, who may be more open to negotiation and bartering.
If you’re looking to finance a used car, many consumers also don’t know that you could sort your finance first with a finance broker and then get the car you want from any dealership in the UK that is verified by the FCA. With so many different buying options to explore, it’s worth taking your time and not just rushing into the first car that you set eyes on.
Get Ready To Negotiate
For many buyers, negotiation is a scary word. But it shouldn’t be; just remember that the power is in your hands! Negotiations don’t mean you have to try and haggle thousands of pounds off the cost of a vehicle, but you could save a little money if you’re bold enough to just ask.
You could compare the price of the car you like with another local dealership who may be able to get you a better offer. If this is the case, dealers may lower the purchase price or offer you more money for your part exchange to help offset the cost, and keep you from turning your attentions elsewhere.
Part Exchange Your Current Car
Having a car to part exchange can help to get you a better deal on a used car. When you part exchange your car, dealers will evaluate your vehicle and use the cost to offset the price of your next vehicle.
This can also remove the hassle of having to sell your current car and instead you can drop it at the dealer when you pick up your new one. In some cases, though, you may be offered a better deal on your current car if it’s not currently on finance or if you choose to sell to a private buyer.
Do be aware that some dealers factor in the cost of things such as cleaning your vehicle or putting it through an MOT before they resell it, but generally speaking, this shouldn’t affect the money you’re due too much.