Car number plates used to change once a year, sparking a frenzy of buying activity across the country in August as drivers waited to get the new registration letter. That changed four years ago when the registration system ran out of letters. After discussion with car dealers, the DVLA and manufacturers, a new system was developed to calm the autumn glut and spread car buying more evenly across the year.
As a result, it is now numbers not letters that denote when a car was registered. The two-digit number in the first six months of the registration year, March to August, differs from that used on new cars sold between September and February. Cars registered since March 1 2005 have 05 on their number-plates, while from September 1 registrations will include 55, the year of registration plus 50. The system is designed to last 49 years, from the 01 and 51 number plates issued in 2001 to the 51 and 99 plates which will be issued in 2049.
The new "55" number plates start rolling off forecourts on September 1, setting in motion the sale and resale of up to 1.9m cars. Getting a new car will always be expensive, but some drivers will be spending hundreds, maybe thousands of pounds more than they need to. Follow our guide to make sure you're not one of them.
What is the best way to pay?
According to dealers, you'll get the best deal if you walk in to their showroom with cash in January as staff are desperate to make a sale. But for those without that option, credit will have to do. Hire purchase, credit cards, and unsecured personal loans combined with savings and the trade-in value of your old car can all be used to finance your new car. Most people, however, will use some sort of unsecured personal loan, either arranged through their bank or building society, or through the garage where they buy the car.
Is there anything wrong with getting a loan from the garage?
Arranging finance at the garage is easy, but can also be very expensive. The AA reports that most buyers simply accept the first finance deal they are offered, with one in four going for the dealer's package. But this is a mistake that can cost you dear. According to price comparison website Moneysupermarket.com, dealer finance packages typically charge interest of 13.8% APR. This does not compare favourably with typical high street bank personal loan charges of 6.4% APR.
Lloyd East, general manager at AA personal finance, says most people are prepared to haggle over the price of a new car. "But savings made on a garage forecourt can quickly get swallowed up by paying over the top for finance."
Alliance & Leicester says that over the life of a four-year £12,000 loan, the dealer's finance package will typically cost you £1,700 more than a personal loan. Nationally this means £2.33bn a year is wasted on high interest payments. Typical APR rates offered by dealers include BMW and Audi at 10.9%, Vauxhall at 11.8%, Mercedes at 13.5%, Peugot at 14% and Reg Vardy at 19%. The AA on the other hand lends money at 5.8% APR.
So I should shop around for a loan as well as a car?
Yes. Mike Senior, head of personal lending at Bradford & Bingley, says: "How you're going to pay should be [a consideration] in pole position alongside the make and model." Decide how much you want to spend - and how much you can afford each month - and shop around for the best personal loan rates available on the internet before you go to the garage: www.moneyfacts.co.uk is useful for this.
Getting approval for a loan before you visit a garage means you won't fall for any dodgy car salesman's patter about your "bad credit rating" which only he can rectify with his expensive deal. If you are worried about this, check your credit record with www.experian.co.uk and www.equifax.co.uk before looking at cars and you will be one step ahead of the dealer.
What about the trade-in value of my old car?
It is not unusual to be offered what appears to be a very good price for your old car if you sign up to a dealer's finance deal. But be aware this can cost you in the long run. There is often a balance to be made between what your car is worth and what your finance deal will cost you.
Used-car price checkers on websites like www.autotrader.co.uk give you the price to expect for part-exchange or private sales. This is based on industry information and is what the dealer will use - if you are offered above this price you have a right to be suspicious about the finance package.
I'm buying a second hand car privately - what should I consider?
For every new car sold, three and a half old cars are traded on the second hand market, many of them privately. Look for loans which offer more than just the money: the AA, for example, offers borrowers a six-month warranty for your car, new or second hand. This covers mechanical breakdown, which is handy if you drive round the corner and the exhaust falls off.
What if I'm already tied in to a high-interest loan with my dealer?
Swap it for a low-interest deal. This is easy, says Andy Bayes, head of personal loans at Alliance & Leicester: "Those who are already tied to a finance deal from the showroom should consider switching the debt. It is quick and simple to do." In the same way as you can consolidate loans, or switch credit cards, it is simple to take out a low-interest personal loan and use it to pay off the double-digit finance deal. Despite the possibility of an early settlement penalty from the original finance company - this is typically one month's interest - you may find you can save money in the long run.
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