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
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.