Make sure you are in the driver’s seat for the best deal

When fi­nanc­ing or in­sur­ing a car, it’s vi­tal to shop around for the right pol­icy to suit your needs, writes Alison Steed

The Daily Telegraph - Your Money - - Motor Insurance And Finance -

MORE than 400,000 cars are likely to be sold when the new ‘57’ plates come out next week­end, and mil­lions of mo­torists who bought cars around this time of year in the past will re­ceive re­newal no­tices from in­sur­ers soon.

Both groups need to drive a hard bar­gain or they will end up pay­ing far more than they need to for their cars and cover. For ex­am­ple, tak­ing out ex­pen­sive credit agree­ments, of­fered by most mo­tor deal­ers, could leave driv­ers a to­tal of £140m out of pocket, ac­cord­ing to fig­ures from Mon­ey­su­per­mar­ket.com.

The av­er­age in­ter­est rate on mo­tor fi­nance from Vaux­hall, for ex­am­ple, is about 7.9pc, said Richard Ma­son, di­rec­tor of Mon­ey­su­per­mar­ket. Any­one buy­ing a £14,000 car would pay a to­tal of £15,707 over three years, while at 6.3pc, you could get that down to £15,361 – a sav­ing of £346.

That’s equal to more than a fifth of the av­er­age house­hold’s an­nual ex­pen­di­ture on cars, ac­cord­ing to Hal­i­fax – £1,510 per home or a to­tal of £36.5bn across the coun­try.

Neil Chan­dler, head of Hal­i­fax Un­se­cured Per­sonal Loans, said: “For most peo­ple buy­ing a car is one of the big­gest fi­nan­cial com­mit­ments, ac­count­ing for be­tween 4pc and 5pc of house­hold in­come. It’s im­por­tant peo­ple find the best deal or th­ese costs could soon mount up and place a strain on your fi­nances.”

Two com­pa­nies cur­rently of­fer loans on £10,000 at 6.3pc, ac­cord­ing to fi­nan­cial statis­ti­cians Money­facts – Your Per­sonal Loan.co.uk and Money­back Bank.

Sains­bury’s Bank, next in the best-buy ta­ble, of­fers 6.5pc.

Bar­clays has launched a loan specif­i­cally aimed at those buy­ing a car at 7.4pc – com­pet­i­tive when com­pared with fore­court fi­nance. Cus­tomers will get as much as £41.50 a year off RAC break­down cover. It in­cludes a free check to con­firm that any sec­ond­hand ve­hi­cle you are buy­ing has not been stolen, dam­aged in an ac­ci­dent or has any out­stand­ing fi­nance against it.

De­spite a fifth of us spend­ing more than 20 hours flick­ing through car mag­a­zines and view­ing cars, a quar­ter of us would spend less than an hour – if any time at all – con­sid­er­ing how to fi­nance the pur­chase, ac­cord­ing to re­search from in­surer es­ure.

Colin Batabyal, a di­rec­tor of the in­surer, said: “Be­ing shrewd and shop­ping around for the best price, fi­nance and in­sur­ance deals could slash hun­dreds, if not thou­sands off the cost of driv­ing away with a new ‘57’ plate.”

An­other tip when buy­ing a car is to haggle over the price, said Mr Batabyal. One in 10 of us think the ad­ver­tised sale price of the car is fixed and can­not be changed through ne­go­ti­a­tion, even though more than three-quar­ters of men – and just over seven in 10 women – would try to get a bet­ter deal by ne­go­ti­at­ing with the sales­man.

Re­duc­ing the ac­tual cost of the car is as im­por­tant as se­cur­ing the best fi­nance, be­cause the amount you lose in the first year through de­pre­ci­a­tion can be sur­pris­ing. For ex­am­ple, the Ford Fo­cus Style 1.8l would lose nearly half of its value in the first year af­ter it was bought, drop­ping from £14,622 to just £7,563 – a loss of £7,086. Af­ter four years, the value would be just 30pc of the orig­i­nal price, at £4,390 – a mas­sive £10,232 less than the pur­chase price, ac­cord­ing to uSwitch.com. That com­pany’s head of in­sur­ance, Aron Thompson, said: “For most, a one-year-old car rep­re­sents far bet­ter value as this is the pe­riod when the bulk of de­pre­ci­a­tion takes place.

“De­spite the rapid de­pre­ci­a­tion of new cars, in­sur­ers are gen­er­ally sym­pa­thetic, cer­tainly in the first year of own­er­ship. The AA, More Than and Swift­cover all pro­vide a ‘new for old’ ve­hi­cle in the event that the car is writ­ten off. Com­pa­nies such as Saga will ex­tend this level of cover to two years. But there are sev­eral key providers such as the Ad­mi­ral Group who will only ‘pay out’ the value of the car mi­nus de­pre­ci­a­tion or the ‘mar­ket value’.”

Whether you buy a brand­new or nearly-new car, get­ting the right fi­nance deal is only half the story. In­sur­ance also needs se­ri­ous con­sid­er­a­tion to get the best price, yet one in three of us would not even con­sider get­ting an in­sur­ance quote on the type of car we were af­ter be­fore we sign on the dot­ted line, said Mr Batabyal.

“When mo­torists shop around for car in­sur­ance, price is at the top of their minds but hav­ing a goodqual­ity prod­uct is also cru­cial – es­pe­cially if the un­ex­pected does hap­pen. Driv­ers should know what’s in­cluded on their in­sur­ance pol­icy and what’s ex­cluded. Many in­sur­ers no longer of­fer ‘driv­ing other cars’ cover and some poli­cies don’t of­fer cour­tesy cars as stan­dard. It’s cru­cial to read the small print.”

There are ways to re­duce your pre­mi­ums, such as in­creas­ing the ex­cess – the amount you are pre­pared to pay as the first part of a claim.

You can in­sure your­self for the num­ber of miles you will drive – if you know you never do more than 10,000 miles a year, there is no point in be­ing in­sured to drive 20,000.

If you lock your car in a garage overnight, that will also bring the pre­mium down.

But one of the main ways is to have a large no-claims dis­count. This can be built up only while you are driv­ing, and usu­ally you must be the named pol­i­cy­holder.

But Di­rect Line and Nor­wich Union now of­fer peo­ple named on their poli­cies the chance to build up no-claims dis­counts.

Emma Holyer of Di­rect Line, said: “We don’t think it is fair that named driv­ers who have ex­pe­ri­ence be­hind the wheel can­not ben­e­fit from their safe driv­ing.”

With Nor­wich Union’s scheme – Pay As You Drive – you pay for the miles you drive at a dif­fer­ent tar­iff de­pend­ing on the time of day or night. It in­cludes se­cu­rity fea­tures, such as emer­gency ser­vices be­ing able to find you im­me­di­ately thanks to a satel­lite track­ing sys­tem.

Tesco in­sur­ance is of­fer­ing £100 off a TomTom in-car satel­lite nav­i­ga­tion sys­tem, if you take its in­sur­ance be­fore Septem­ber 18. You can get the ba­sic TomTom sys­tem for just £50. Do not be tempted to sign up if the in­sur­ance does not of­fer you the cover you need.

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