You’re buying a new car. You’ve done all the research, looked at all your options, been over the sums several times and finally signed on the dotted line. But, as collection day approaches, an element of doubt creeps in: am I really getting a good deal? Everyone wants to drive away from the dealership happy that they’ve got the best finance deal, so we’ve put together our top money saving tips for buying a new car.
To ensure you get the best value for money, whether you’re buying, leasing or PCPing a new car, it’s wise to do your due diligence before making a decision. Truly reliable money-saving tips for buying new cars are hard to find, so we spoke to some real car dealership sales executives to get their advice.
You can find the latest deals in our Cars of Sale section, and make sure you get a free car valuation so you can get the best price for your old car.
Should buyers pay cash, go for PCP or PCH?
Each of these payment methods have their benefits but personal contract purchase (PCP) is by far the most popular. That’s because you’re essentially only financing a portion of the car’s list price, not the whole amount, and that means the monthly payments are considerably lower.
‘We’d also recommend striking a balance of paying as small a deposit as you can, while keeping the monthly payment manageable,’ suggested one sales executive we spoke to.
The big difference between personal contract hire (PCH) – also known as hire purchase (HP) or leasing – and PCP is that you’re buying the car outright. With a PCP, the car belongs to the finance company, unless you make the final balloon payment. That you actually own the car undoubtedly makes PCH/HP very appealing, but there are drawbacks.
A sales executive advised: ‘Spending £20,000 on something worth less than half of that – and is still depreciating – after three or four years [when the contract ends] doesn’t make as much sense as a PCP, particularly if you’re going to trade it in anyway.’
Paying for a car in full in cash can make sense for a lot of people. You own the car from the outset, you’re not beholden to a finance company and there’s no interest to pay – unless you take out a loan. But it’s not without its drawbacks, as well. The car is a depreciating asset – 20% of the list price is VAT that’s wiped out immediately – and you may be able to score an effective discount with a 0% interest or deposit contribution finance deal.
Discounts can still be available to cash buyers, though. One sales executive confirmed: ‘Dealerships often have to part-fund those low interest rate offers, so we may have some profit margin to play with for cash buyers. Even so, we’d still encourage cash buyers to look seriously at PCPs and spend less money overall, freeing up their capital for other purchases.’
Make sure you visit our finance section for a quote. We work with over 21 lenders to give our customers access to over 100 different lending options. Alternatively, you can find hundreds of leasing deals available via leasing.com, our official leasing partner.
What about GAP insurance?
GAP insurance can be really helpful if you want to sell your car on before the end of a finance agreement. Ending up in negative equity is a real possibility and GAP insurance covers the difference between the balance and the car’s actual value. It’s not a legal necessity but it’s sensible to have it. You won’t need to make a claim in an ideal world, but it could save you from being thousands of pounds out of pocket.
‘You can shop around but manufacturer-sourced policies tend to be the most comprehensive, often coming with a contribution to the premium,’ one salesperson said. Check out our GAP insurance section for a quote.
What kind of discount should you aim for?
As PCP deals have grown in popularity, bargaining over a car’s list price has given way to negotiating lower monthly payments. That can be done by fine-tuning the deposit, mileage allowance and optional extras. Deposit contributions can lower monthly payments, as well.
‘It’s important that customers are honest with us,’ a sales executive said. ‘Few things are more frustrating than calculating a finance package based the customer’s budget, only for them to say “actually, I was hoping it could be less than that,” or “another dealer says they could do it for this.”’
But sales executives will work to get their customers the best possible deal. One commented: ‘We’ll do our best to secure a deal with a customer, but it could well be we sell identical cars at £200 per month to one and £180 to the next. Work out exactly what you can afford each month and deduct about 10% from that figure. If you subtract more than that it may scupper your chances of a deal on the car you really want and we’re likely to feel that you’re wasting our time.’
Most dealers will still be open to negotiating the price for a cash deal, as well, and the monthly payments on PCH.
Can you get discounts on options?
All options specified on a car have to be paid for by the dealership, albeit at a much lower rate than the retail price. It’s highly unlikely you’ll get them for free, but a healthy discount is possible.
‘That £1,000 leather interior option could be yours for half that figure, while your sat-nav upgrade may appear to be free because you’ve paid the full price for a £1,250 safety pack. Metallic paint is usually the easiest option to obtain at low cost,’ explained one salesperson.
Buying from stock vs ordering from the factory
Buying a car that a dealer already has in stock could save you a big chunk of money, but it depends if there’s an individual sales executive – or the dealership as a whole – that needs to move metal to meet their monthly targets. But even if not, you can still get a substantial deal because the transaction gets done quicker.
‘The sooner you’re driving off in your car, the sooner they’ll reach their target and be in line for a bonus payment,’ explains one sales manager. The best times to get a discount on stock are before the bi-annual car registration changes, and when a model is updated or replaced. At that point, the dealers just need rid of the now out-of-date cars.
If you order a car from the factory, you may not be able to get as substantial a discount and you’ll have to wait for it to be delivered, which could be many months. But it’ll be specified to your tastes and requirements – don’t let the salesperson dictate the colours and options, they’re only concerned about how easily the car can be sold on in a few years. Similarly, don’t let the salesperson steer you into a car from stock that’s not to your requirements.
When’s the best time to buy?
Prices are generally consistent throughout the year, but you could find yourself landing a better deal if you pick the right moment to buy. You could wait until there’s a finance offer or a chunky deposit contribution, or you could go to a dealer at the right time.
All car sales executives – and dealerships as a whole – have to meet monthly, quarterly and half-yearly sales targets. If they’re struggling to meet those targets and you happen to be there when they just need to make one more sale, you could get a great deal. But they won’t advertise that fact, plus they may have already met their target and not be in as generous a mood.
One sales executive advises that, ‘in all honesty, you’re better off buying when you’re ready rather than trying to second-guess how well a dealership is performing. That said, if you happen to find an unsold convertible in mid-winter, a bargain could be had.’
Preparing your trade-in
You may as well give your car a thorough clean before trading it in – also known as part-exchanging – but there’s no need to pay to have it professionally valeted. ‘If we take it as a part-exchange, we’ll budget for doing that anyway,’ offers one sales executive. ‘All we ask is that if there’s any damage to the bodywork, wheels or interior, that it’s clearly visible when we appraise the car.’
What will help considerably is having all of the car’s service history to hand, ideally including a service book showing garage stamps at the correct intervals. That will speed up the part-exchange process and may even add to the car’s value. You can find out how much your car is worth using Parkers’ free car valuation tool.
Selling privately vs trading-in
It’s usually better to sell your old car privately as you’ll get a better price for it than you would by trading it in against your new car. That can increase your buying power and/or your ability to negotiate a better finance deal. But it can be an awful lot of hassle and many people don’t want to deal with it – entirely understandably. So they’ll take the financial hit and trade-in.
The sales manager we spoke to admitted,’ yes, we will endeavour to make a profit on selling your old car on to a new customer, but we operate a business so that’s natural. We’ll also spend money on tidying up cosmetic work, servicing it and adding a warranty, all of which are costs we need to recoup.’
How to get the best deal
Here’s the consensus among our selection of sales executives: be pleasant, be honest and set time aside. The easier it is for a sales executive to build a rapport with you, the harder they’ll try to secure you a deal that’ll get you into the car you really want.
Be straightforward about how much you want to spend and whether you’ve already received some quotes. ‘If we can beat it, we will. But if we can’t, you’ve still had a great offer elsewhere,’ explains the sale manager.
They added: ‘Don’t wander into the showroom 10 minutes before closing. Buying a new car can be a two- or three-hour process to do properly. When the process is rushed, mistakes can be made.’ Successfully navigating the world of car finance can be tricky, but with a little know-how and the right money saving tips for buying a new car, there’s no reason why you can’t find a great deal on your next purchase.
