For many of us, our cars are the second most expensive investment after buying a house. If you’re looking to swap your car or buy a new vehicle, it’s important to set a budget. In this guide, we’ll discuss some key factors to consider when calculating costs.
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Buy or lease
One of the most significant points to think about when you’re swapping your vehicle is whether you want to buy or lease. More and more drivers are choosing to take out an agreement on a car, which enables them to pay installments over a fixed period, which is usually 3-5 years. There are various options to explore, including signing a lease agreement or paying for a contract with an option to buy the vehicle at the end of the lease term. If you want to buy a new or used car, you can either pay the total outright or spread the cost via auto finance. This makes buying a car more affordable, and it may also enable you to choose from a wider range of vehicles.
Whether you choose to buy or lease, you’ll need to check that you can afford to cover the cost of the vehicle before signing an agreement. If you want to buy the car, make sure you have sufficient funds to purchase the vehicle and cover insurance. If you want to pay monthly, check your budget and ensure that you have enough money to make the repayments.
New vs used
The cost of a car can vary hugely and age is a driving factor when considering value and purchase cost. New cars are usually more expensive than used vehicles and they lose value quickly. Used cars are more affordable and they may also be more likely to hold their value. If you are thinking about buying, rather than leasing, it’s worth exploring used cars. Not all used cars are old. You can buy vehicles that are less than 5 years old. If you like new models, but you can’t afford a car straight off the showroom floor, buying a nearly new car could be an excellent choice.
Spec and customization
If you’ve ever shopped for a car before, you’re probably aware that there is usually a choice of options available, including standard models and cars that come with all the bells and whistles. The spec, engine size and customization options can impact the price. Many people, especially those on a budget, will be happy with the standard version, but if you have specific requirements or you’re keen to modify your car and add new rims or a more advanced entertainment system, for example, you’ll pay more. It’s worth comparing the prices of different models and getting quotes for extras, modifications and accessories before you decide which car to buy.
Added costs
The cost of buying a car is only one expense to consider. When you own or lease a car, there are additional outgoings to cover, including auto insurance, gas, repairs and maintenance and in some cases, tax. Make sure you factor in these expenses when you’re drawing up a budget for your next vehicle. You don’t want to buy a car and then find out that you can’t afford to keep it on the road. Get some quotes for insurance before you take out a policy. You can use online comparison sites to compare policies and prices from different providers. You may be able to save money if you have a policy that covers multiple vehicles or you have no claims bonuses. It is always worth getting quotes before automatically renewing, as insurance companies often offer incentives for new customers.
Short term and long term costs
When you’re looking for a replacement car, it’s helpful to assess short and long term costs. You may feel that it makes financial sense to buy a cheaper used car, for example, but buying an old car could end up costing you more in the long run in maintenance and car repairs. Newer vehicles may cost more but the risk of paying out for repairs will be lower. It’s also beneficial to consider running costs related to fuel consumption. Eco-friendly cars may cost more to buy initially, but you could save a substantial amount of money on fuel.
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Buying and running a car can be costly. If you’re looking to swap your car or buy your first vehicle, it’s crucial to set a budget. Consider whether you want to buy or lease, figure out how much you can afford to spend, explore different types of vehicles and deals and weigh up the long and short term costs.
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