Cost of car ownership

Saving up in order to buy a shiny new car? Here are some things to consider when you start thinking about putting money aside.

What kind of car is right for you?

Think about what you'll use the car for. If you're likely to be starting a family, you might need to re-think that two-seater you've always promised yourself. And consider what you need most from a car. If you only need extra luggage space now and then, a saloon or hatchback with an occasional roof box could be significantly cheaper than paying the extra for an estate version.

Should you buy new or used?

The way car makers reward their franchised dealers means buying a new car can sometimes be cheaper than a nearly-new model. Buying new removes some of motoring's financial uncertainty, because sweeteners such as free servicing, first year's insurance and breakdown cover are often included.

New cars also have warranties - a manufacturer-backed guarantee - which can vary from three to seven years depending on the brand. If you buy a used car, it's vital you budget for maintenance. A dealer may offer a used car warranty - for a price. Read the small print very carefully to see what's included. Some are worth the extra cost; others aren't.

Are you buying outright or on finance?

Around three quarters of cars are bought with monthly finance instalments. These deals are good if you have a set budget for motoring costs. But don't forget: you'll still need a deposit. And the bigger the deposit you've saved, the lower your monthly payments.

Buying on finance does mean you can drive a new car without tying up too much capital. Some Personal Contract Purchase (PCP) deals feature interest at very low annual percentage rates (APR). Even so, finance can work out more expensive than saving up and paying in one go because of interest payments. And finance deals can sometimes lock you in for several years. Our guide to car finance has some useful tips.

Have you factored in running costs?

According to car valuation expert CAP Automotive , the biggest cost of running a car is the money it loses through depreciation. This can vary dramatically from car to car. But whatever model you choose, the newer the car, the more its value will diminish.

Fuel costs can be predicted by estimating your mileage over the year and factoring in the car's fuel economy and the price of petrol or diesel. Online tools (like that at Petrol-Calculator.co.uk ) can help.

Road tax is calculated according to a car's carbon dioxide emissions. Generally, the smaller and more economical the car, the less you'll spend on fuel and tax.

Insurance is dependent on the size, cost and desirability of the car as well as the miles you cover. But your experience and history as a driver, occupation and postcode also play a part.

Also consider servicing and maintenance. If you're saving to buy a sports car you'll also need to put money aside for the expensive tyres it'll need. Equally, a classic car might require regular costly maintenance to pass its annual MOT test.

For more information, read our guide on the cost of running a car.

How long will you keep it for?

Are you the kind of person who saves a little, buys a banger and runs it into the ground? Do you like to put money aside and change cars regularly so you're always driving a new model with the latest tech? Or are you somewhere in the middle? Your answer will help dictate how much you must save to fund your new car.

Are you saving a realistic amount each month?

There's no magic to motoring: knowing the car you want and how much it'll cost to buy, run and maintain enables you to work out how much you need to save.

First, work out a timescale. This will give you a goal to aim at and allow you to see how realistic your savings plan is.

List your regular outgoings - this will allow you to build a picture of what is an achievable amount to put into a savings account every month.

It doesn't matter what kind of car you've set your heart on, saving up will help turn your dream into reality. And before you know it, that gleaming new motor will be all yours!

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