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Monday, 2 September, 2002, 07:25 GMT 08:25 UK
Q&A: Buying a new car
Q & A Buying a new car
The new '52' car number plates are on their way - available from 5 September - and that will mean stampedes at dealerships. BBC News Online looks at the pros and cons of buying new and how to ensure the best possible deal.

Does buying new make sense?

Some would suggest not, because in many cases as soon as the new owner drives their pride and joy off the dealer forecourt it can fall in value by thousands.

Depreciation is at its greatest when a car is new. In fact, 50% can be wiped of the value of a new car within a year of first registration.

Yet this doesn't deter buyers. According to the Society of Motor Manufacturers & Traders (SMMT), a record 2.4 million new cars were sold in the UK in 2001 - an increase of 10% on the 2000 figure.

How can buyers avoid being hit hard by depreciation?

As a rule of thumb, prestige brands and new models tend to depreciate the least. Conversely, mass-market brands and old models can lose value at breakneck speed.

However, to confuse matters more, models that are being discontinued and mass-market brands are often more attractively priced.

Most car dealers would recommend buyers go for inoffensive colours such as blues and silvers rather than quirky, bright, or off-the-wall shades of yellow, orange or purple.

As for interior design, care has to be taken. After all a leopard skin pattern on the seats might not appeal to others when it comes time to sell the car on.

Can buyers twist the arm of dealers into lowering prices?

Fortunately for bargain-hungry buyers there is an oversupply of cars in Europe and the market is ultra-competitive.

New car prices have fallen by more than 10% on average in the UK over the past two years.

Nevertheless, with car prices embodying "rip-off Britain" for many, buyers have got used to haggling.

For many buyers, a car's list price - the car equivalent of the recommended retail price - is increasingly being used as a starting point from which to haggle downwards.

Any bargaining tips?

The message from the SMMT is that buyers need to do their homework.

Negotiating a large discount off the list price is great but can be negated if the dealer is able to get away with offering a below-market rate for a car being traded in.

Nearly two-thirds of private new car buyers have a vehicle to trade in. The difference between the new car price and the trade in value is called the "cost to change".

Ensure the lowest cost to change by visiting several dealers, comparing prices, and consulting Parkers and Glasses car price guides which give the low-down on going trade-in rates.

Are High Street dealers tied to a single manufacturer the only place to buy new?

Absolutely not. Recent years have seen the rise of online dealers and out-of-town car supermarkets.

They both have the advantage of selling more than one brand and, as they buy in bulk, prices are often lower than list.

And that's not all. Many UK car buyers - tempted by lower list prices - choose to buy their vehicles from the continent.

Buying abroad sounds risky?

Thousands of Britons do it every year without a hitch but buying abroad is not to be undertaken lightly.

First, there are language and currency barriers to overcome. Also if something isn't right with the car at collection time it can be a problem to get the dealer to put things right.

In addition, the paperwork can be onerous as the car has to be certified as roadworthy for the UK - for example, it has to have the required number of seat belts fitted - and transit plates have to be paid for at a cost of 150-200.

And VAT is payable on the car when it is imported into the UK.

However, a 12-month warranty applies irrespective of which EU country the car is bought from.

Nevertheless, if all that seems like too much fuss, there are car brokers in the UK that will import cars to order.

Going through a car broker has the advantage that the sale is subject to UK consumer laws such as the Sale of Goods Act.

What finance options are there?

Many private buyers fund their new car purchase with some form of borrowing. Taking out an unsecured personal loan or hire purchase are the two traditional ways of funding a new car purchase.

However, in recent years, more flexible repayment plans have started to come to the fore.

Most manufacturers now operate Personal Contract Plans (PCPs). Under this type of scheme the repayment schedule is split into three very distinct parts.

First, a deposit is paid - usually 10% of the cars value. This is followed by 36 or 48 monthly instalments.

At the end of the term, a pre-agreed single lump sum payment is made by the borrower to clear the debt.

However, borrowers do have the choice, once the instalment stage is finished, to simply hand back the car with nothing more to pay.

See also:

28 Aug 02 | Business
23 Jul 02 | Business
10 Jun 02 | Business
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