car keys in hand

Best way for a young driver to buy a new car?

As a young driver buying a car, trying to balance cost, comfort, aesthetics and practically factors can be an almost impossible task.

Purchasing a vehicle is becoming ever more difficult for young drivers to afford. Do you take out a lease deal? Is buying outright from a dealer the way to go? We have summed up some pro’s and con’s for all the popular buying avenues to help you young drivers make the right choice.

leasing a car

Leasing a vehicle.

Taking out a ‘lease’ on a vehicle is usually a fixed short term agreement  (2 – 5 years) which incurs monthly payments.

The Positives:

  • A lease enables you to pay for your car on a fixed monthly basis, without having to purchase a vehicle outright.
  • You will be able to drive in a higher priced, better specification car than you could afford buying outright.
  • Most leases are for new or late model vehicles that are covered by manufacturers warranty.
  • It is very often as simple as handing back over the keys when your lease term is complete, without the worry or hassle of selling your vehicle.

The Negatives:

  • Monthly payments although somewhat ‘easier’ can build up over time making it very difficult to save your cash for other life events.
  • Nearly every lease agreement will limit you to the amount of miles you can drive per year, or as a whole. The more miles you need, the higher the monthly payments. Not only that, but if you exceed your agreed mileage agreement, you will have to pay an excess penalty, which can be anywhere from 5p to 30p per mile.
  • You must return your vehicle in excellent condition, or risk paying large amounts of ‘wear-and-tear’ charges. Some agreements will even state that any damages must be fixed by an approved garage or by the manufacturer themselves, which can be very expensive compared to local garage prices.

Verdict on leasing a vehicle:  

Mid 2018 statistics saw that over 1.6 million people in the UK lease a vehicle. But is the right choice for young drivers? If you are in a position where you don’t have a lot of savings to put towards buying a car, then it does seem like a sensible choice. However, consider buying a very economical vehicle with low monthly repayments, and also think hard about your mileage requirements in relation to your education or employment. For example, if you are a post-graduate with uncertainties about employment, is it wise to take out a lease that will restrict your daily commute?

Buying a vehicle outright from a dealer:

Are you in a position where you could buy a vehicle in one full payment from a dealer?

The Positives:

  • Perhaps the biggest positive is that the car is YOURS. You own the vehicle entirely.
  • You are not restricted to any miles.
  • There are no monthly payments to pay on the purchase of the vehicle itself, allowing you to begin saving again.
  • You are free to modify the vehicle to your pleasing, which lease agreements often restrict. However, please note this may increase your insurance premium.
  • You are free to sell the vehicle at any time that might reflect a change in your personal circumstances. This can also include part exchanging your vehicle for a better one at a reduced price.

The Negatives:

  • Cars by nature are one of the most rapidly depreciating assets you can own. Unless you are buying a classic vehicle or a car with an appealing custom specification, you will only be able to re-sell your vehicle years later at a fraction of the cost you bought it for.
  • Depending on your budget, most young drivers will only be able to afford a second hand vehicle that has some significant miles on the clock. The older the vehicle is and the more miles it has done, the more likely you will run into problems with maintenance and repairs down the line.
  • Buying a second hand vehicle will more than likely have no manufacturers warranty due to it’s age.

Verdict on buying outright from a dealer:

This all depends on the amount of money you have and are willing to spend on a vehicle. Always remember that most vehicles depreciate in value and you should never ‘impulse buy’ something like a car.

 

PCP (Personal Contract Purchase):

Think of this like a personal loan to help pay for the vehicle, but not at it’s full price. Essentially, you put down a deposit payment and ‘borrow’ an amount of money that reflects how much the vehicle will decrease in value over the period of the deal (usually 2 – 4 years). The amount left over is what the lender believes the car will be worth at the end of your agreement term, and also what you will have to pay IF you want to own the vehicle outright. If you don’t, you can simply hand the car back over.

The Positives:

  • A PCP is often a lower monthly payment plan than a standard lease or hire purchase.
  • You might not be able to get a brand new car, but it will certainly be a late-model with decent mileage that you would not usually be able to afford outright.
  • The end of the agreement is flexible. You can give the car back, buy it or even part exchange any equity for a new PCP deal.
  • Some PCP deals include maintenance packages that are very worth while, and can save huge amounts on future repairs, especially if your agreement in quite long (4 years+).
  • The lender will ‘guarantee’ your vehicle to be worth a certain amount at the end of the deal, giving you peace of mind about any re-sale problems. Also, it many cases most PCP vehicles are worth slightly more than this value allowing a little equity to go into another deal.

The Negatives:

  • During the contract period, you do not own the vehicle.
  • Similar to a standard lease, Mileage limitations do apply and costs will incur if you go over them.
  • Although standard wear and tear is considered, again you will be required to fork out for any damages to the vehicle at the end of your agreement if you wish to return the car back to the lender and walk away.

Verdict on PCP:

If monthly payments are tight, but you really need a reliable, decent vehicle, PCP could be a great option for you. The flexibility at the end of the deal gives you options if you’re uncertain about your financial situation at the time. However, if you see yourself having the same vehicle for many years to come, it may be best to consider getting a personal loan or hire purchase for the full value of the vehicle.

Buying privately:

You’ve probably scanned a website such at Auto Trader and seen a pretty good deal on a private sale. But is it worth jumping at?

The Positives:

  • Buying privately can save you money off the bat. You can snap a great deal from a seller looking to make a quick sale and even use your negotiating skills to get the price even lower.
  • Buying privately can also save you a huge amount of time.
  • An honest seller can give you very detailed information about the car, which a dealer with hundreds of cars will not.

The Negatives:

  • Unless a legal agreement is drawn up, you loose most warranty clauses or ‘money back’ privileges a dealer will give you, especially if you pay cash.
  • Unless you ‘know your stuff’ about cars, you can often blindly buy a vehicle without knowing any major problems it might have.
  • Most other purchasing avenues such as leases throw in maintenance packages which can save you a lot of money in the long run. If you buy privately, any problems (large or small) are now solely your problems.

Buying privately verdict:

If you get the right deal, at the right time, from the right vendor… you can definitely save a huge amount of money buying privately. But that’s just it, getting that perfect deal is very hard to come by which makes buying privately a risky avenue. Our advice would be to take a family member or friend with you who knows about vehicles that can help you make the right decision. Always test drive the vehicle first, and get a professional opinion where possible.

Looking for the best deal on your car insurance? Get a quote from MyFirstUK today! We specialise in getting the best deals for young drivers.

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