5 tips for buying a car on a budget


Whether you’re considering buying your first car, or feel it’s time to upgrade your current model, buying a vehicle can seem impossible if you’re on a tight budget. As well as the thousands of pounds you’ll need to spend on the car itself, you will also have to consider insurance, taxes and other fees to cover while you’re out on the road. Luckily, a new set of wheels doesn’t have to be as expensive as you think. Follow these tips to bag yourself a new car at the lowest price.

Calculate your costs

You probably already have a rough idea of how much you’re willing to spend on a new car, but you will also need to factor in the costs of continuing to run it. Beyond keeping it insured and making sure it has a full tank, there’s annual MOT tests and maintenance, and vehicle tax to consider, the latter of which depends on how much CO2 your car emits.

Savvy buying techniques could help you reduce some of these fees. For example, you can cut car insurance costs by paying annually rather than monthly so you aren’t charged interest, or take out black box insurance cover. This involves installing a telematics box to track your driving, allowing you to pay less on your vehicle, provided you drive safely and follow the rules laid out by your policy. And while electric vehicles (EVs) tend to be more expensive than their gas-powered counterparts, buyers are exempt from vehicle tax. Studies have also suggested that EVs are cheaper to own and run. Take all these factors into consideration, and look for any potential deals and cost-cutting measures. Then once you’ve set your budget, stick to it.

Decide how you’ll finance your car

Although making a single payment is the cheapest way to buy a car in the long run, not everyone has the funds to pay up front. If you can’t save up the money, or you need a vehicle more urgently, buying a car on finance is an affordable short-term option.

The two main types of finance offered by dealers are hire purchase (HP) and personal contract purchase (PCP). HP is a loan secured against the car itself, where you’d own the vehicle after the final payment. PCP requires lower priced instalments, followed by a lump sum ‘balloon payment’ at the end which enables you to purchase the car outright. This is also known as the minimum guaranteed future value (MGFV), though if you no longer want the car, you won’t need to pay it. Instead, the MGFV will be returned or, if the car is worth more than the balloon payment, you can use the difference as a deposit on another vehicle.

HP can often work out cheaper than PCP because you’re paying the loan back faster. Another difference between the two is the fact that HP plans have no mileage limitations, whereas PCP agreements will include restrictions. This is because the number of miles you’re expected to have covered by the end of a PCP agreement will be used to work out the MGFV. As noted by lenders at Carfinance+, the amount borrowed in an HP agreement is based on the car’s value at the beginning, so you’ll pay back the amount that was agreed on at the start of the plan, even if its value decreases over time. However, as the cost of a PCP loan is determined by the car’s MGFV, you’re only borrowing the difference between its value at the start and end of the agreement.

If you don’t want to start a finance plan, you could consider using a credit card or personal loan to finance your new car . Bear in mind that these options are usually only available if to those with a good borrowing history, so if you don’t, it’s better to look for a car finance provider who offers deals to people with bad credit.

Consider when you’ll be buying your car

Buying a car on Monday rather than Sunday, or in December rather than May could considerably impact how much you end up spending. Shopping earlier in the week is beneficial, as there will be fewer customers, allowing you to receive more personal attention, and more time to negotiate a better deal. Similarly, dealers are keen to fill their yearly and quarterly quotas, so waiting until the end of the year could help you make a saving. Ramit Sethi, best-selling author of I Will Teach You to Be Rich says New Years Eve is the best time to buy a car. This is because it’s the last chance for a dealer to make both of these goals and receive their bonus, meaning they’ll be keen to shift cars as quickly as possible.

You also need to consider how the time of year could affect demand for the particular car you’re interested in. For example, convertibles are more popular in the summer, and four-wheel-drive vehicles tend to peak in autumn and winter, which means you’ll be more likely to save money if you shop for these makes out of season. Alternatively, wait until new versions of existing models are due out, and buy the previous version during its last few weeks in the showroom, when dealers will be keen to shift it. If you’re hellbent on having the latest version, wait a few months after it’s launched, when the buzz has died down. February and August are also good times to shop as dealers will want to get rid of stock before new number plates are released in March and September.

Shop around

Searching for a car online is the easiest way to compare local dealers and find private sellers through platforms like Gumtree. You can find either pre-negotiated discounts, or ask them to obtain one for you once you inform them what type of car you’re looking for. It’s crucial to obtain quotes from every seller you ask, in order to help you find the cheapest deal and negotiate the price accordingly.

According to AutoTrader, franchise dealers who specialise in one or two manufacturers are the best places to look for high quality, newer models. You may also be able to obtain financing and warranty as part of the service, though franchise dealers tend to be the most expensive option overall. Independent dealers are cheaper, but may offer fewer services, and have less knowledge of the specific model of car you’re buying. Car supermarkets are great for a wide range of low-cost, mainstream vehicles, but will charge an admin fee, while private sellers may offer the best prices as they don’t have business costs to worry about. However, this method is most commonly used to sell older models, and you’ll have less legal protection, so will have to conduct rigorous checks to ensure you’re not being scammed. Explore all your options to boost your chances of snagging the best price.

Try and haggle

Haggling can often feel nerve-racking and uncomfortable, but you need to deal with it if you want to save significant sums on your car. If you’ve researched sellers, you’ll already have some idea of what you should be paying, and you could always supplement your understanding by referring to online valuation tools and buying guides. This information can help you set your starting price, which you can ask a dealer to then match or beat. You should also keep an eye out for any minor issues with the car, like scratches or streaky windshields, as although you can easily fix these yourself, pointing them out may help you drive down the price.

Car sales teams almost always have room to manoeuvre when it comes to price, though you could haggle for other perks like free servicing. However, if they don’t offer you any incentives, don’t be afraid to simply walk away. You should never pay more than you’ve budgeted for, and there’ll always be other places to look.


Please enter your comment!
Please enter your name here