Back to Car finance

Buying your next car: Three essential things to think about

If you want to buy a car, there are a few key questions to ask yourself.

Figuring out your ideal make and model is a great place to start - but should you buy new or used? Are you ready for the real running costs? And how will you pay for your car?

To help you get going, our guide explains what to think about and what your options are.

Which car will you get, and where?

Your choice of car is going to be determined mainly by your budget and by your needs. Are you looking for a convertible, or a family car with enough room for three kids and a couple of buggies?

Start by getting a rough idea of costs for new and used versions of the car or cars you're interested in. Manufacturers' own websites will show you how much a brand-new model will cost, while online classified-ad services such as Autotrader will give used prices as well as new.

These sites are especially useful in showing you all the cars available in your chosen category in your local area, and within your desired price range.

Your buying options

New vs used

Many people swear by buying brand-new cars, but for others the cost can be prohibitive. Depreciation means that cars lose value the fastest in the early years, so you can get a nearly new car (which is one or two years old) for much less – provided you don't mind that someone else has driven it before you.

Bear in mind that new cars typically come with a three-year warranty, which means that any mechanical issues that arise during that period are covered by the manufacturer.

Dealer vs private sale

If you're planning to buy a used car, classified sites will usually show you vehicles available both from dealers and private sellers. Should it matter who you buy from?

If you go down the dealer route, you should get more guarantees about the car you're buying. For example, there should be clear evidence of previous ownership, so there's no risk you're getting a stolen or previously written-off vehicle.

New consumer laws which came into effect in 2015 mean that people who purchase cars through dealerships have more rights: if a problem occurs within the first 30 days, the buyer can reject the vehicle and get their money back.

And for any faults which occur after 30 days but within six months, buyers can request a repair, replacement or refund unless the seller can demonstrate the fault came about after the sale.

Private sales offer no such guarantees so it is up to you to check the car is in good working order. But in general, prices at dealerships are higher, so this is a trade-off you'll have to consider.

Buying privately carries other risks: there is a greater chance the car is stolen or has a dodgy history. And there are a number of scams that target used-car buyers: beware of a vehicle that is much cheaper than you think it should be, and also look out for sellers who ask you to pay a deposit before you see or test-drive the vehicle.

What running costs will you need to budget for?

The ongoing costs of owning a car are just as important as the price you pay for it. Do your homework in advance to make sure you can afford to run the vehicle as well as buy it.


This could be one of the biggest expenses. The cost of cover can vary wildly and is based on factors such as the type of car, your age and occupation, where you live and how much you plan to use the vehicle. Use a price-comparison website to check likely insurance prices before you buy. Adding extra drivers to your policy – especially learners or young people – can push costs up considerably.


Fuel efficiency is very important, and a number of websites let you check how many miles you'll get per gallon – use that information to work out how much you're likely to spend filling up. Simply do a search in your internet browser for "check fuel efficiency".


The amount of vehicle excise duty (VED) you'll pay depends on your vehicle's CO² emissions. The seller should be able to tell you what tax band your vehicle falls in, and you can check annual rates on this UK Government website. You can now pay tax through monthly direct debit to help spread costs.


If your vehicle is out of warranty, you'll have to pay for any repairs yourself. And the older your car is, the more likely it is to suffer mechanical issues, but it is difficult to predict how much they might cost. Once your vehicle is three years old, you'll have to pay for an annual MOT check – the current cost is £54.85.

Breakdown cover

This is optional, but it can provide peace of mind on longer trips. Again, use a price-comparison service to check likely prices based on the extent of cover you want.

Cost of finance

If you are borrowing money to buy your car, include your expected monthly repayments in your running costs as well.

How will you pay for your car?

If you have a few hundred or thousand pounds to spare, you might be able to pay for your new car in cash. Failing that, you will probably have to look for some form of credit.

Hire purchase and personal contract plans

Many dealerships and manufacturers offer buyers credit deals such as hire purchase (HP) and, more recently, personal contract plans (PCPs). These are types of credit that mean you make monthly repayments for a fixed period, often with a deposit payable upfront.

With HP, at the end of the period you become the legal owner of the car.

Using PCP is more complicated: at the end of the term, you have the option of paying an extra lump sum to own the car. Otherwise, it goes back to the dealer, and you can choose a new vehicle.

With both options, you don't own the car until the final payment and/or lump sum payment is made – so if you miss any repayments, you could lose the vehicle.

Credit card

If you pay by credit card, you will own the car outright from the start. There are a number of cards with low rates available for fixed periods (generally between one and three years), but you will need a good credit score to be accepted for one.

Bear in mind that some retailers impose high administration costs on credit-card purchases. And also check the small print on your card: there are a number of reasons why interest-free periods can be withdrawn, such as late repayments.

Also, if you don't repay what you have spent on the car within the low-interest period, you will then face much higher rates – typically around 20%.

Finally, you may not be able to borrow enough money to pay for the car you want with a credit card: credit limits on cards tend to be lower than on unsecured personal loans, for example, especially if you are a new customer.

Unsecured personal loan

An unsecured personal loan is perhaps the most straightforward and easy to understand way of financing your car purchase. You apply to borrow a fixed amount of cash, and then pay it back, with interest, in fixed monthly instalments over the next one to five years.

You will own the vehicle from the outset, and you will have the peace mind of knowing exactly how much to repay every month and when your loan will be cleared.

As with HP and PCP, the size of your repayments varies depending on how much you're borrowing and how long your repayment period is. Bear in mind, though, that the interest rate on your loan can change depending on how much you borrow and for how long. For example, smaller loans (of under £5,000, say) tend to have higher rates.

Explore car loans from £1,000 - £25,000

We're here to help

Monday to Thursday (8am to 8pm), and Friday (8am to 5pm).


Telephone: 020 7580 6060

We can't take applications over the phone. UK residents only. Calls may be monitored or recorded.