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Monday, 23 July, 2001, 13:03 GMT 14:03 UK
Q&A: Buying a new car

The European Commission has reported that UK consumers are still paying much more than their continental cousins for new cars. So, is it really worth buying a new car? And if you want a new car, how do you make your money go a long way.

Is it worth buying a new car?

Despite the European Commission's research, which reveals that Britain is the most expensive place to buy a car in Europe, it is now cheaper to buy a new car in the UK than two years ago

Between October 1998 and October 1999, car prices fell by 1.3%.

However, in the year to last December, car prices plummeted by 10.4% according to Alliance & Leicester's Car Price Index.

Car prices fell because the Department of Trade and Industry (DTI) ordered the car industry to drop prices by 10% or face greater regulation.

However, the rate of price cuts has begun to slow.

In May, according to the last figures available from Alliance & Leicester, new cars were only down by 7.9% from the previous year.

Should I buy second-hand?

If you want to buy a second-hand car, you may have missed out on some great deals - prices collapsed last year and there were plenty of bargains.

But, the second-hand market is now firmly in the seller's favour and not the buyer's.

For example, the cost of buying a three-year-old car fell by 21.7% in the year leading up to August 2000, while a one-year-old car was down by 18.2%.

But, the market has recovered so much that second-hand cars on average are now worth more than this time last year.

"People are now hanging on to their cars, in anticipation that new cars will become cheaper", says Geoff Seymour of Alliance & Leicester.

Negative equity?

A collapse in the second-hand car market meant that many people who had bought their cars a few years ago with the help of finance deals faced 'negative equity'.

The drop in value meant that the money owed on the vehicle was a long way short of its value.

But most people should now be in a better position thanks to the recent rises.

Should I import, or buy from a UK dealer?

Even though prices have gone down in the UK over the last few years, it can still be much cheaper to import a car from Europe.

You can either import a car yourself, which you must collect and register. Alternatively, you can buy through an agency which will deal with all the paperwork for you.

The biggest savings tend to be on more expensive cars, but you can still make savings across the board.

For example, the list price (UK published price) for a Renault Clio 172 two litre is 15,495, but you could get it through Broadspeed, a car importer, for 10,795 including Value Added Tax (Vat) and registration costs.

Alternatively, a BMW 530 Diesel Sport costs 32,005 in the UK, but it would only cost 25,953 through Broadspeed.

If you decide to import, you may have to choose a slightly different specification than if you bought the same car in the UK.

Buyers from the continent can also experience delays.

If you decide to buy through an importer, it is important to ask about the track record of the European dealer and if there have been any problems with the particular model in the past.

Alternatively, some companies are now stockpiling imported cars, which cuts down the waiting time as there is already a supply of imported cars in the UK awaiting collection.

If you do not want to import, you may be able to get a cheaper car at a UK-based dealer by haggling. Bargaining may reduce the cost by as much as 5%.

But the best way of buying a car is to compare prices between dealers and car importers - many websites have useful comparison charts.

Remember that UK dealers will try and emphasise problems with importing, and are likely to stress that their cars have superior specifications, but these may not be worth it.

How do I maintain the value of my car?

When you are buying a car, you should also think about its re-sale value.

Make sure the specification is right - white paint may not be the best colour if you want your car to retain its value.

Concentrate on worthwhile add-ons, such as metallic paint or a sunroof rather than seat heaters and in-car computers.

You can also get an idea about re-sale values through lists which are published in motoring magazines, such as What Car?

See also:

25 May 01 | UK
Car insurance set to soar
25 May 01 | Business
Q&A: The cost of car insurance
11 Feb 01 | Business
Drivers face 'negative equity'
23 Jul 01 | Business
Inflated prices for British cars
14 May 01 | Facts
Fuel tax in the UK
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