BRAND ADVICE

Cash for bangers: are you better off
buying new or second-hand motors?

Provided by Barclays

A reliable motor is, for many Britons, still an absolute necessity rather than a luxury. And if you're a second-hand car dealer, chances are you are one of the lucky few to have been making a tidy profit during this recession, according to new research.

Barclays research looking at the purpose of personal loans reveals that as consumers tighten their belts, the use of personal loans to finance the purchase of brand new cars is declining and we're increasingly looking at borrowing to buy second-hand cars instead.

And small wonder. According to the Office of National Statistics (ONS) UK households spend, on average, more on transport than on almost any other single household expenditure. Its latest report, Family Expenditure Survey 2008, shows that transport costs account for 13% of total expenditure - more than food at 10%, and more than housing fuel bills and utilities at 11%.

However, Chancellor Alistair Darling's latest announcement that the Government will be offering a cash incentive to consumers to scrap their old bangers and buy new, could help make the dream of a nice, shiny new car a reality.

The newly launched 'Cash-for -Bangers' scheme - which offers a £2000 cash incentive to people who trade in old cars for new or nearly-new models - has seen droves of eager customers flocking to car showrooms to check out the new deals. The move is designed to reverse a recent slide in sales in the UK's car manufacturing industry and will be co-funded by the Treasury and the manufacturer of the new car purchased.

For some, the helping hand of a £2000 bonus will make buying a new car comfortably affordable. However, given that the average cost of a standard family car comes in at around £10,000, making up the difference could, for many, still prove a very tall order.

Old or new?

The big question is whether or not - depending on the age and value of your car - the government scheme would offer a genuine bonus for you. Check out the sale value of your old motor and then do the maths - would you be better off doing a private sale and then buying a second-hand car with the proceeds? If it does look like a great deal for you, call into your local car dealer to get a clear picture of all the latest deals before you rush in.

New wheels deals

You will qualify for the £2000 discount scheme as long as your car or van weighs less than 3,500kg and is more than 10 years old and has been in your name for more than 12 months. You must also have a valid MOT certificate, and a UK address on the registration certificate.

As manufacturers are obliged to stump up 50% of the discount, it's hardly surprising that not all are keen to take part, although many major brands have announced their commitment. The Government policy stipulates that manufacturers must apply the discounts to all models. As an added incentive, some are offering special deals on larger models such as Ford, which is offering a £5,000 discount in exchange for your old car as an incentive to buy the new Galaxy model.

Second hand news

If a new model is out of your league regardless of cash incentives, second-hand wheels can, in these lean times, make good financial sense. The depreciation of used cars is much less than new cars, which lose value as soon as you drive out of the showroom. A well-chosen second hand motor can serve you many years down the road.

Haggle wise

If you don't generally haggle over prices, ask yourself why not? With disposable incomes shrinking, haggling your way through the recession is an absolute must. When dealing with a new or second hand car salesman it doesn't pay to be shy. The trick is to do your homework and know exactly what you want and how much you're prepared to pay.

For second-hand cars, the best buys are cars less than three years old with an average annual mileage of 10,000 on the clock. When buying older cars, keep your eyes peeled: appearances can be deceiving.

Finance savvy

Whether you choose to buy a new car or second-hand model, work out your maximum budget - and stick to it. And don't forget to factor in all the additional costs such as road tax and fuel.

Getting an unsecured personal loan to help pay for a new or second-hand car could be the smartest way to get yourself on the road. If you require a loan to make up the difference on a 'cash for bangers' deal , or a finance agreement to help manage monthly payments for a second-hand car, it is highly advisable to get your finance arranged in advance. A buyer who is able to move quickly has a better chance of negotiating a discount even on a new car or second-hand model that's in great condition.

If you’d like to find out more about a personal loan from Barclays, please visit www.barclays.co.uk/loans

f you're a Barclays current account holder, you can take advantage of Barclayloan Plus at 9.9% APR typical* on our loans from £7,500 to £25,000. You could also have your money within 3 hours if your online application is accepted†.

† If you apply before 2pm on a working day and your application is approved. Apply after that time and, once approved, you'll get your money the next working day.

* This rate was correct at time of publication, 20 August 2009. Eligibility criteria and conditions apply. Loans are subject to status and application. We set individual rates on the basis of your financial status and the amount borrowed. You may be offered a Barclayloan instead of a Barclayloan Plus and therefore the rate you're offered may differ from the typical APR shown.**

** If you're offered a better deal anywhere else within 14 days from opening your Barclayloan or Barclayloan Plus with Barclays, we'll beat your offer. Terms and conditions apply to this offer. Please follow this link for more details – view Price Guarantee terms and conditions.

The information given in this article was correct as at August2009. It does not, however, take account of any changes in regulations, the law or interest rates since that time.

This article is not a substitute for obtaining professional advice from a qualified person or firm.

Examples given of products and services are not exclusive. Other companies may provide the same products and services, and inclusion of a product or service should not be taken to indicate that Barclays recommends it over any similar product or service.

Barclays Bank PLC is not liable for any third party opinions expressed. While every effort has been made to ensure that the information contained is accurate at the time of publication, no liability for damages is accepted by Barclays, the publishers or any other organisation or person providing information, arising from any errors or omissions that may appear, however caused - or from any editorial alterations to submitted information. This is not intended and will not affect any liability of Barclays under the provisions of the Financial Services and Markets Act (2000.)