Our guide explains how to buy a new car, covering everything from finance options to insuring your new car
How to choose the right car for you
If you’re looking for a new car, it’s likely you’ve already got a model or type of car in mind. But the car you buy could have a big impact on your finances — not just because of the cost to purchase it, but you should also take running costs and insurance into consideration too.
Different types of car are put into different insurance groups, having a big impact on the price you’ll pay to cover your car. Find out more about insurance groups and the cheapest new cars to insure in our guide.
And if you can’t decide on whether to buy new or used, check out our guide on what to look for when buying a used car.
How to pay for a car
The most obvious (and cheapest) way to buy a car is with cash. But if you can’t do that, research your finance options before going to a car dealer.
You could find much cheaper car finance by shopping around with different lenders, instead of signing up to a loan on a forecourt.
Car finance loans
Compare all sorts of loans from personal loans to car finance loans.
Car finance loan
Car finance loans will typically lend you however much the car you want to buy costs. They are usually secured against your car. So, in the worst case, if you miss multiple repayments, it could be repossessed.
However, this security means that the lender is willing to lend bigger sums, offer better rates or even just lend in the first place to people with poor credit scores.
There are two main types of car loan:
- Hire purchase - You pay an initial fee, then agree a series of monthly payments until the car is paid off.
- Personal contract purchase - You are given the option of buying the car at the end, or handing it back. If you choose to purchase at the end there will be a final 'balloon' payment which you agree at the beginning and relies on you estimating the value of the car in future.
If you want to borrow up to about £35,000, then it’s worth taking a look at personal loans. These are unsecured loans offered against your credit score. The better your score the more you’ll be able to borrow and the less it will cost you.
While a personal loan is typically the cheapest way to borrow a big sum of cash in the long term they are relatively inflexible. You will have to meet fixed monthly repayments for the duration of the loan term. If you can’t meet any repayments, your credit score will be damaged.
If you want to buy a car costing round £1000-£5000 you could consider a credit card. But do note that your credit limit will vary with your credit score.
Using a credit card can be a cheaper and easier way to pay for car than a loan. You also enjoy more flexibility with your monthly repayments than with a loan.
If you use a 0% purchase card and pay off the balance before the interest-free period expires, you can effectively borrow for free. However, be careful – if you don’t pay off your balance in this period, you will be charged higher interest rates than most loans.
Though, not all car dealers will accept payment through credit card. So it’s wise to research this first before turning up to the forecourt with only plastic in your pocket.
How to sell your old car
Another way of financing your car is to look for the best price for your old one.
There are a few options to consider, whether your priority is to get the most money for your old car or to make a quick sale.
Selling privately: Selling your car to a private buyer can help you to get a good price, but bear in mind any advertising fees as well as the time it can take to take calls and conduct viewings.
Selling to a dealer: You may get less from a dealer, but you'll be offered a price upfront and could have the car taken off your hands quickly. If you're buying your new car from the same dealer you may be able to agree a part-exchange deal.
Selling to a car-buying service: A car-buying service like Motorway may be the most convenient way to sell if you want to quickly make room for a new car. You can get a quick online valuation, arrange a free collection and get paid the same day via instant bank transfer.
How to insure a new car
If you already own a car and are planning to replace it, you’ll need to decide whether you want to transfer your current policy over to your new car or whether you will be better off cancelling your current policy and taking out a new one to cover your new vehicle.
Whatever you do, you must inform your insurer when you buy a new car, even if your new car will be a second (or third, fourth or fifth) vehicle. You will need to tell your insurer as they need to know how many vehicles are kept in the household.
If you’re replacing your current car, get in touch with your insurer and ask if they are willing to insure the new one. Bear in mind that they may charge you to change your vehicle details and the car could affect the price, particularly if it is more valuable or powerful than your current vehicle.
If you’re unhappy with the new price your insurer quotes you, you might be better to shop around for car insurance quotes for your new vehicle. Your current insurer may charge you a cancellation fee, but if you can get a good enough deal on your new policy, you still could save enough to make switching worthwhile.
Are you insured to drive your new car home?
Don’t just assume you can drive your new car home and sort out the insurance later on — valid insurance is a legal requirement and you’re breaking the law if you drive the car home without being covered.
If you’re buying a new car from a dealer, it’s likely you’ll be provided with ‘driveaway insurance’, which will cover you temporarily for the first few days of owning your car. But be sure to check with your dealer — it’s not worth the risk if you write off your new car on the way home or get stopped by the police, only to find out you’re not insured.
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