Whether you are financing a car for the first, second, or third time, there are particular important cost considerations. A few of them even affect post buying period. A few of them include fuel costs, depreciation, maintenance, MOT, car tax, insurance, etc.
There are many types of car loans for everyone in the UK. However, money borrowing options should include these factors and others. The latter consists of maximum repayment capacity, monthly expenses, assets, income, etc.
People with bad credit have an option to avail a loan without a guarantor in the UK or other similar options. It can help to fulfill their car buying dream.
5 Crucial Cost Considerations before Financing a Car
Besides the car cost, insurance for the automobile remains the most significant expenditure while financing or buying. However, it has bands ranging from one to fifty, with different cost ranges.
According to a source, the yearly car insurance costs for drivers between the age group of eighteen to twenty-four are £1,100.
Unfortunately, new car buyers don’t pay much attention to this fact and pay much more than required. Moreover, several insurance comparison websites can help to find the most suitable option.
The insurance policy price can also get lowered with the help of a relative, friend, or family member over twenty-year age. However, the second driver should have a clean driving record to get accepted for the policy.
● Correct Tax and MOT Date
Car buyers should ensure an updated Ministry of Tax (MOT) certification and automobile tax. MOT is for three-year-old cars and ensures roadworthiness. According to a source, an MOT test costs £54.85. However, additional repairs can increase car costs.
Moreover, cars without MOT have a fine of £1000 if driven on the road. By law, operating such a vehicle is prohibited. Besides MOT certification, the buyer also has to manage Vehicle Excess Duty (VED).
Other expenditures would have pricing based on the car registration date, engine size, and CO2 emission. Therefore, car buyers should pay keen attention to these factors to spend on the required amount.
As per RAC, an average car has a minimum yearly maintenance cost of £472. It encompasses MOT service and additional repairs. However, new car buyers should read their insurance, warranty, and maintenance manuals thoroughly.
It will help to reduce expenditures if it consists of free MOT or service for the first time. Unfortunately, the facility remains unavailable to users that don’t have an existing car warranty. Dealers often provide thirty days to three months warranty to new car buyers.
Additionally, they provide the option of an extended warranty for a longer duration and lower costs. Buyers can even compare online warranties for a model to find the most suitable choice and reduce expenses.
● Fuel Costs
Although mpg is a factor that is informed to all new car buyers by the dealers; however, a few people choose to ignore it. But it plays a vital part for petrol and diesel cars as it would consume the fuel based on the average.
Most car buyers should remember that a car with a large engine capacity would consume more fuel. Therefore, a buyer should consider the average monthly cost of driving beside the repayment deductions.
Many buyers also forget to add miscellaneous driving expenses costs such as everyday market rides, occasional long drives, lending, etc. Make sure to include them in the fuel costs even if any known person drives it.
Additionally, certain factors can help to achieve the maximum mileage. These include switching off the AC, gentle acceleration, smooth driving, low breaks, etc. Additionally, heavy vehicles consume more fuel. Therefore, keep the load away from the automobile.
According to RAC, fuel consumption can also improve by two percent with correctly inflated tires. Additionally, avoid continuous fuel light signals can damage the car, and therefore, the driver shouldn’t max out the consumption.
It can also lead to a severe breakdown and land the driver in an unavoidable situation. Under such circumstances, the repair costs significantly higher than fuel refills.
Another post-buying factor for car financers should include depreciation. The value of an automobile starts decreasing the day it leaves the showroom. It is a crucial factor for buyers that want to exchange the vehicle in the future.
Additionally, new drivers often cause major or minor car damage. The situation is also possible by lending the vehicle to someone. Therefore the depreciation value can diminish even further.
According to a source, a car depreciates by fifteen percent in value post-buying. Therefore, a £1000 vehicle would diminish to a value of £430 in the next five years. Therefore, £114 would be the annual depreciation for such an automobile.
Furthermore, the average cost of driving lessons in the UK is £255. Also, the average yearly expense of parking is £200 or more. According to a source, a daily commuter car park can lead to more than £1000 annual expenditures.
According to a source, the car’s average ownership cost is £3,214, excluding the payment for driving lessons.
It consists of depreciation, new driver insurance, vehicle tax, MOT & service, 12,000-mile fuel, and parking. Including the driving lesson expense of £255 would increase the cost to £3,469 in the first year.