Finance making new cars cheapest?

Finance making new cars cheapest?

New research by What Car? suggests that motorists may be able to buy a brand new car from hundreds of pounds less than a year-old model.

A range of attractive finance offers, as well as the low-cost or interest free loans currently being offered by dealers can make new car buying a cheaper alternative to picking up second-hand.

Many believe that, due to the sharp drop in value that occurs when a car leaves the forecourt, it is far more beneficial to buy a used car. But when taking into account deposits, monthly finance or personal loan payments, excise duty, warranty and MOT costs, as well as depreciation costs, new cars were found to could cost less in 50% of cases.

What Car? found that a new Skoda Citigo, listed at £9,490, would cost the buyer £5,029 over three and a half years, whereas a one-year-old version priced at £8,598 would cost £6,246 over the same period - with the consumer saving £1,217 by buying new.

A new Citroen C4 Picasso would cost £12,850 over four years, while a one-year-old version would cost £13,436.

Peter McCullough from RACCars.co.uk said: "There is a general acceptance among car buyers that second-hand offers greater value and flexibility. While the research implies this might not always be the case there is really no right or wrong approach because everything depends on individual financial circumstances. For many people, the repayments involved on new cars are simply too great whereas for others they offer good value.

"It's also very important to read the small print on finance agreements because there can be big and important differences depending on the type of package. Buyers need to make sure they understand the rates they're being charged and any early termination feeds. In general unsecured personal loans tend to offer more flexibility than personal contract purchase.

"The best advice is to think about what's right for your needs and work out the pros and cons of each as well as thinking about the potential pitfalls that might arise during your period of car ownership."

Copyright Press Association 2014