Buying a car: Fuel for thought?


‘Buying a car – how do I do it?’
It’s one question we get asked a lot.
So it’s time we shared with you all your options when getting your first car…
(from someone who’s still technically a learner!)


The number of cars on the road may have dipped slightly in 2020 (almost certainly because we were mostly at home) but there are more and more cars on the road than there were twenty years ago.
It is estimated that over 70% of UK households have at least one car*, and this is one topic we get asked a lot by our clients – how to save up to buy a car. Your main options are either cash or some form of car finance agreement.
Before we zoom off, we need to apply the brake and give you a bit of background info beforehand. And stop with the puns.

In fact, the first thing to consider is – do you actually need a car?
If you’ve got good transport links in your area then perhaps you don’t need the latest Land Rover or Porsche SUV.
And what about parking? Here in Edinburgh, finding a free space is as rare as not seeing someone walking a dog in Inverleith Park. Wearing yoga pants.

Running Costs

Before anything else, have you considered what your running costs will be?
An MOT is fixed to be no more than £60 but then there’s also vehicle tax, which is payable depending on when your vehicle was first registered. The older the car, the less tax.
A full tank is roughly £51* and if you’re putting the miles in, that means over £2k a year, if you’re topping it up every week. An older car might cost less initially but it may need expensive parts which are no longer readily available. That aside, the less high-tech electrics, the less chance that you need to replace the motherboard on a late 90s Vauxhall Zafira!
You’ll also need to get vehicle insurance – it’s not going to be cheap!

Diesel? Petrol? Other?

COP26 has recently been in the news so it’s definitely worth considering what your potential fuel costs may be. Petrol produces more CO2 than diesel but is actually less toxic than diesel.
Electric or hybrid cars are slowly becoming more popular but remember that currently, you are limited with regards to access to a charging station. Meaning you may have to rely on diesel or petrol if you cannot charge the electric battery.
There’s also the fact that the technology is constantly improving so will it be economically viable to buy it or is it best to wait a few years?
Yes, that vintage car you have your eyes on may cost you less vehicle tax, but is it worth it, if you know how bad it is for the environment?

New or used?

There’s pros and cons to both sides of the argument. With a new car, you’re buying with the knowledge that your purchase will come with a warranty. This means that if anything happens to the car within xyz years, you should be able to get it fixed or replaced.
Most new cars come with a minimum of three years’ warranty and some even go as high as seven years.
The downside of buying a new car is that it decreases in value pretty much as soon as you drive it away from the forecourt. The average depreciation ranges from 10% (if it’s a top of the line/premium name) to as much as 40% (lesser-known or less respected models)
A used car will have a shorter warranty period if buying from an approved dealership. If it’s a private sale, then good luck – you’re taking someone’s word at face value.

buy a car

The dream of the open road. Not a tailback in sight…

End destination?

What’s your end goal for buying a car?

Are you looking to get something cheap & cheerful for driving around town or for infrequent trips (i.e. short breaks, school run, weekly shop)? Perhaps you want something a bit flashier? Maybe you’ve come into some money and really want to splash the cash?

Start your engines…to start saving

If you don’t have enough for the asking price then it’s time to start saving up for that set of wheels.
The more you can save, the less of a deposit you’ll need. And the greater the negotiation angle so a fixed-term savings vehicle would be ideal here. Put your money it in and do not touch it.

Buy now or pay later? What are my options?

When buying a car, you have a few options open to you…


Personal Loan

A cash buyer will always be preferable than a finance one – and this doesn’t just apply to buying a car.
We see it all the time when making the big purchases such as a property.
If you’re in a position where you’re fortunate enough to have the capital to hand, either by some savvy investing or from an inheritance, you’re more likely to be able to negotiate a better price.
That aside, if you have a good credit history, you should be able to get a good finance deal when buying a car on PCP or HP, if considering one of the other finance options.

PCP? PCH? HP?! What’s with all these acronyms?

Chillax a moment and let us explain what this means…

PCP means ‘personal contract purchase
This is actually the technical term for ‘car leasing’ and is offered primarily on new cars.
What this actually means is the car is yours but you are subject to some conditions such as mileage limits. The difference is that after the fixed term is over, you can opt to either return the vehicle, swap it for another vehicle or buy it outright, for an additional ‘balloon payment’.

PCH is ‘personal contract hire
Similar to PCP but the vehicle cannot be bought and at the end of the agreement, you will have to hand the keys back. It’s a good option if for example you are looking at new or used cars.

HP stands for ‘hire purchase’.
This is the more familiar term and means that once you’ve put a deposit down on a vehicle, you start paying back the purchase price each month over a fixed term.
If you don’t want to have the same car in five years’ time and want the flexibility to change, then this is a good option for you.

And a personal loan is exactly what you think it is – in this case, you take out a set amount and pay it back with interest over a fixed term.

Small print reminder time
You should note that each option will come with its own set of terms and conditions/pros & cons – for example, buying with cash won’t show up on a credit check and affect it, but if you’re planning to buy property and have poor credit, this would.
Both PCP and PCH require deposits and you will need to pay attention to any terms around mileage as you could get stung with additional costs.
HP terms can be quite expensive, compared to the others and a loan, as simple as they are, means if anything happens to the car, you will be the one having to pay to fix it – unlike the other options!



* RAC Car Ownership report 
* Petrol costs (2020) taken from ChooseMyCar report