Buying and running a car on a budget

For some people, being able to buy and run a car on a budget is very important.

You might be a student struggling to finance a car that can ferry you backwards and forwards between home and university. Maybe you are between jobs and need a cheap runaround to get you to job interviews that are further away.

Perhaps you’ve just moved to an area where public transport links are not very good but you need a car while balancing the costs of your move.

Whatever your reason, it is important to know that this can be done, and it doesn’t have to be very difficult as long as you’re in the know.

That’s where we come in – read on to find out what our top tips for buying and running a car on a budget are.

Plan your budget
Your budget will have the most influence over what car you can feasibly buy. Don’t try and overstretch what you can afford to spend, as this can lead to long-term problems. This is especially true if your finances are prone to change, because if you have less cash coming in than before you may not be able to afford running costs or repayments. The Money Advice Service has a budget planning tool that can help you to work out how much extra cash you will have each month, which can really help you to budget for your car.

Do your research
When it comes to finding a car, look for models that are known for their reliability, hold their value well, and have a good safety rating. The best places to find this information are websites such as WhatCar?, CarBuyer and Honest John, which provide in-depth reviews that can help to inform your decision. You should also look out for cars that are known for being cheap to run – insurance, road tax, and petrol can quickly add up, so choosing a model that is both economical and qualifies for low tax and insurance rates can keep costs down.

Don’t be afraid to go used
If you don’t have the budget for a new car, used cars can sometimes offer just as much reliability for a cheaper price, provided you choose correctly. Like fine wines, some cars age very well and you can often find models that run like new for a fraction of their original price. For some stellar ideas, take a look at the best used cars to buy from Auto Express’s Used Car Awards 2015. Attending car auctions, browsing listings, or logging onto eBay can offer many bargains as long as you have the funds to pay up front. If you are looking for car finance, it may be worth looking into dealerships or private garages for a good deal.

Explore your finance options
There are a number of options open to you when it comes to financing your car. Obviously you can pay up front if you have the budget for it – particularly useful if you are looking to buy a super-cheap used car from a private seller.

Unfortunately, it is often not as simple as that and you may find yourself considering the finance options for your car. The process of getting your car finance has two stages: deciding on what kind of financing you want, then finding the provider whose deal suits you best.

There are five main types of car finance:

  • Personal loan – taking out a personal loan involves independently organising a loan with a bank or building society to finance the purchase of your car. You can often shop around for the best deal — look at the annual percentage rate (APR) to compare them. The downside to personal loans is that if you default, the moneylender can seize any of your assets and not just the car.
  • Hire purchase – using this method to finance your car will require you to pay a deposit up-front and monthly repayments until the car is paid for. Until then, the car belongs to the hire purchase company and you can’t sell it. There may also be an additional fee payable if you choose to buy the car at the end of your repayments.
  • Personal contract purchase – this finance option is very similar to hire purchasing, however you get more options when you reach the end of your repayments. You can choose to keep the car, return the car, or trade the car for a replacement.
  • Personal contract hire – this is also known as personal leasing. Essentially, you are renting the car for a set number of years with a pre-agreed mileage limit for each year (usually 10,000 miles). There is no option at the end of the deal to keep the car.
  • Dealer finance – these packages differ from dealer to dealer, but they can often be weighed heavily in their favour at first, so don’t be afraid to haggle. Going in armed with knowledge of similar financing and manufacturer offers can help you to get the best deal possible for your car.

You can find more detailed information and the pros and cons of each kind of financing option in this guide from sites such as the Money Advice Service and Which?. Remember that while getting a good deal on a car’s price is good, you need to be careful not cripple yourself with a poorly thought out financing scheme.

Run your car cheaply
Once you have found the car that you want and have settled on a sensible financing option, you can begin to use your car. Just because you’ve finally found your freedom doesn’t mean you should stop looking for ways to save money.

There are a few ways that you can keep the running costs of your car down so that you can keep more cash in your pocket:

  • Avoid premium fuels for your standard car – there are quite a few petrol stations that sell ‘high-performance’ fuel that costs a bit more than standard petrol. Your cheap runaround doesn’t need anything like that, so stick to the cheaper stuff.
  • Young driver insurance deals – if you are a young driver, insurance can often be overpriced. There are many specialist deals available on the market that allow you to save money with certain conditions, such as having a black box installed to track your driving habits. Sites such as Money Saving Expert have great guides to finding the best deals on your insurance.
  • Learn about car maintenance and practise it – being able to carry out your own minor repairs can save you a great deal of money in garage fees. Read a few books or take a car maintenance course to improve your skills. There are sites like DriveDen that supply replacement or extra parts that you can install yourself if you put in a little extra effort.
  • Learn to drive economically – it is actually possible to drive the same distance in the same time and use less fuel. Accelerating gradually without over-revving, driving in higher gears, slowing down naturally are just some of the ways you can save fuel.

By following these tips, you will be able to buy and run a car for a fraction of what is would cost without putting in a bit of research. Practise what you’ve learned and you could save a lot of cash in the future.