In budgeting terms, the cost of car purchases must be viewed in two distinct ways. Not only should the purchase price and financing terms be carefully considered, but the ongoing monthly cost of motoring must also be factored-in, as a share of your total household income. According to data recently compiled by the Office of National Statistics, each motorist spends about 55 weekly, to stay on the road. The figure does not include insurance, which pushes the real cost of motoring toward 70 per week, on average.
The cost of keeping a car includes a number of expenses, which go beyond the purchase price of your car. In addition to insurance, motorists pay for petrol, repairs and maintenance, and incidental charges of being mobile. Surprisingly, the amount paid for the privilege is more than families pay for mortgage interest, food. Twice as much is spent on motoring, in fact, than what average families pay for their electricity and gas. Despite the cost of motoring, however, UK residents continue to buoy the automotive industry with their steady appetite for cars.
Car Buyers Find firm Footing Following Recession
As global economies continue to recover from the downturn experienced several years ago, car sales are showing steady growth. New car sales are up, with the National Dealers Association reporting upwards of 2 million new cars moving through the UK automotive market in 2014. Dealership technologies provided by firms like Dealertrack (https://us.dealertrack.com/content/dealertrack/en/dealer-management-solutions.html) can be one of the reasons increasing car sales in several countries like the US. By providing car dealers with an integrated suite of optional software, the above-mentioned firms help dealers increase profit and improve customer satisfaction. Moreover, advanced DMS technologies can also help car dealers process payments simply and securely.
That said, there are several ways to fund your car purchase. Loans of various sorts, including guarantor loans, personal loans and secured loans help bridge affordability, for buyers who cannot fully cover the cost of their cars at the time of purchase. Dealerships commonly offer zero per cent financing for select customers. In order to qualify for the best terms, you’ll need to prove a strong credit history.
Depending upon the terms of your deal, a substantial deposit will likely be required to get the purchase process moving. For the most attractive financing, expect to pay upwards of 40 percent of the value of the car as your initial deposit. The remaining balance will become due in monthly installments until your loan agreement is satisfied. In order to avoid default or other difficulties, this monthly car payment should be accounted for as a share of your total outgoing monthly budget obligations.
Some buyers prefer ‘hire purchase’ agreements that typically charge between seven and thirteen per cent interest. Payments are made over time, including steady interest obligations, which continue until the hire purchase contract is satisfied, after which the payer takes ownership of the car.
Other forms of financing are available at rates below 4 percent, including standard personal loans and type of cosigner loan. Guarantor loans enable applicants to add another party to their loan documents, to provide further security for lenders. Under the terms of guarantor loans, each party is ultimately responsible for repaying the loan. The spirit of the transaction, however, is for a family member or friend to play a passive role, simply offering his or her strong credit reference to the process.
Cash buyers are in a good position to negotiate and influence the price paid for a car. For starters, dealers like the idea of getting paid up-front, so they are more willing to discount cars for cash buyers. And since most dealers make use of auto dealers software for managing sales processes, manner of payment won’t be an issue. No interest is paid on cash sales, there is a built-in incentive to buy cars outright whenever possible. The impact of removing such a sizable sum from your savings may mean financing is a better approach. The trend is on the rise, in fact, as more UK car buyers are turning to financing options rather than cash. Leasing cars is another option, but it appears as though today’s shopper is more likely to choose a credit purchase over a lease.
Next to mortgage payments, monthly motoring costs represent one of the most significant household spending obligations. Despite increased reliance on car financing, the number of new cars leaving dealerships is up as consumers appear to embrace a brighter motoring outlook. Lower car costs and affordable zero per cent deals, as well as generally higher consumer confidence are driving sales and keeping buyers interested.