Dec 172018
 

Leased or Financed New Car?If you’re considering buying a new car, you’ll have to decide whether you want to lease or finance the car. (Of course, it’s also an option to pay in full upfront, but most of us aren’t in a position to!) There’s a lot to consider when deciding between leasing and financing, including the cost of monthly payments, your driving habits (how many miles you expect to drive annually) and how long you anticipate you’ll have the car. But what about insurance costs?

Yes, the way in which you choose to pay for your new car could affect the insurance you pay every year.

The Difference Between a Leased and Financed Car

First things first, let’s identify the main difference between leasing and financing: ownership.

When you lease a car, you’re essentially renting the car for an extended period of time. Each month, you pay to continue renting it and, at the end of your lease period, you return the car to the dealer.

When you finance a car, you make monthly payments to a lender and, after your finance period ends and you’ve paid off the cost of the car and any interest incurred, you own the car free and clear.

Of course, since the terms of the agreements for leasing and financing are considerably different, the cost of each is also different. Leasing tends to be less expensive as your monthly payments essentially only cover the depreciation of the car. That way, when you return the car to the dealer, they haven’t lost any money. This explains why leases often have mileage restrictions; more wear and tear accelerates depreciation.

When financing a car, your monthly payments cover the cost of depreciation and your equity in the car so that after, say, 36 months, the car is yours.

Is it More Expensive to Insure a Leased or Financed Car

Whether you chose to finance your car or take out a lease, a third party has an interest in protecting the vehicle. When financing, that third party is whatever financial institution gave you the loan that you’re paying off each month. When leasing, that third party is the leasing agent or car dealer to whom you’re making a payment to every month.

While, yes, in both cases a third party has an interest in protecting the car, the leasing agent has more to lose if the car is damaged. As such, it’s required that leased cars have fully comprehensive coverage, which could cost more than the third-party insurance that all drivers in the UK are legally required to have.

It’s also important to realise that, when providing details about your vehicle to the insurance company, the registered owner isn’t you, but your finance company.

So, does all of this mean that leased cars are more expensive to insure than financed cars? Not necessarily! There are a handful of factors that can affect your insurance quote including the driver’s age, driving record, convictions, the make, model and year of the vehicle, the value of the vehicle and even where you park your car. 

Top Tips for Reducing Insurance Costs

If you’re looking to reduce your insurance costs, switching from a leased car to a financed car shouldn’t be your first step.

Instead, look for a car with a smaller engine that’s worth less money, keep your car garaged, consider having a black box fitted and agree to a mileage cap.

Sep 042017
 

When choosing a new car, it’s easy to spend as much on optional extras as it is on the car itself. From being seduced by the latest mod-cons to the occasional, dodgy dealer trying to promote unnecessary extras, consumers are inundated with options.

While some extras won’t add value, not having certain options on a modern car can make it almost impossible to sell. Choosing which to purchase can be confusing, so we’ve put together our top tips on what’s really worth it…

Built-in sat nav

Traditionally, integrated sat nav units were an expensive luxury. However, they are increasingly being offered as standard, and even optional or upgraded units can be cheaper than what you’d have paid a few years ago.

A built-in sat nav can help a car retain value, especially in executive models where it’s often considered an essential. It’s worth knowing it can be more expensive to update maps than with standalone GPS, but lots of manufacturers are now offering free updates with their integrated systems for fixed periods. Keep an eye out for these deals to save on future costs.

Air conditioning/climate control

Very few cars are sold without air con. However, several smaller city and supermini cars may not include air conditioning, or only make it available as an extra.

It’s worth adding air conditioning if you have the option, as you’ll be thankful for it on warm days and it can keep your windows frost and mist-free in cold weather.

Not only this, but air conditioning and climate control are among the handful of optional extras that help to boost cars’ resale value. Some compact hatchbacks can even be worth a few hundred pounds more with it fitted.

It’s worth bearing in mind problems with A/C can sometimes occur in built-in systems. Make sure your warranty covers air-conditioning to avoid unplanned costs.

Parking sensors

Parking sensors have been widely used for some time now and are the most common parking device on the market. They not only help to improve resale values, but some models come with both front and rear sensors, which give an audible/visual warning of approaching objects. Not only does this help to make parking easier (especially for larger cars), vehicles with parking sensors can see the average insurance premium fall by 13 percent.

Which aren’t worth it?

Personalised or statement colours

While you might adore your bright pink Fiat 500, there is a chance not all would be as bold in their colour choice. Silver, black and blue are the most common car colours in the UK – while not the most exciting, personalising your car colour to something more flamboyant could limit the number of potential buyers for your car.

Gaudy body kits

If you’re looking to fit a full body kit, a bigger exhaust, or alloy wheels you may wish to reconsider. Just as with personalised colour, these options are very much down to personal taste. You could find it harder to sell and some modifications can raise insurance prices by up to 66 percent and even invalidate your car warranty.

Adaptive suspension

Usually an option on premium or performance vehicles, adaptive suspension constantly adjusts in response to changing road conditions to ensure a continuously smooth drive. While this is a great perk, it typically raises the cost of a car by nearly £1,000, without necessarily adding enough value for it to be worth the cost when it comes to selling your car on.

Sep 032017
 

The prospect of buying a brand-new car is an exciting one, especially as some of the newest models give access to the latest features in terms of safety, performance and comfort.

It’s vital you give your decision careful consideration though, as different needs, budgets and features, means finding the right option can be confusing.

That is why we’ve put together our Warranty Direct guide on what to look for when buying a new car.

Budget

Before you start looking at favoured options, you should finalise a budget and know how to maximise it. Some will be able to buy a new car outright, but many of us will need to consider finance options. Some of the most cost-effective finance deals are available with 0% APR and if size is not an issue smaller models can be a good option as many are available from as little as £150 per month.

How much your loan costs will depend on your credit history, and knowing this can be useful as it will give a better idea of what to expect from lenders. The Consumer Credit Act allows consumer access to credit reports by post or online.

Longevity

Taking a more practical view when it comes to vehicle choice is a good way to pick a car that’s best for the long-term. Whilst a small sports car may retain its value well and be suitable for your current lifestyle, it might be completely inappropriate for your needs a few years down the line.

Economy, in terms of MPG and fuel type, will also be important with the new diesel tax on the horizon. Smaller petrol cars will be good to consider after this change, as they will most likely retain their value better and have lower road tax.

Features and extras

Motoring technology is advancing at an unparalleled rate and in-car systems such as WiFi, 4G connectivity and voice control are becoming commonplace. However, technology will continue to develop features such as parking assist, night vision cameras and autonomous safety features, meaning more improved safety and comfort.

Assessing and researching these latest features will allow you to work out which deals are the best value for money when it comes to meeting your own, personal requirements.

Models that hold their value

The biggest issue when buying a new car is they can lose their value quickly. Most cars depreciate at a rate of around 20% per year over the first three years of ownership. Some models shed cash quicker than others, meaning you’ll get a lot less when you come to sell it on.

It’s important to research which vehicles usually retain their value better than others, such as budget SUVs or smaller sports cars.

For more information on depreciation, you can also consult our guide.

You can guard against any potential loss of value by investing in a GAP insurance policy, which is particularly worthwhile if you’re paying for a new motor on finance.

When it comes to a car, assessing your needs, financial situation, and forthcoming industry developments will mean you’re well-placed to get the maximum for your money and your vehicle will retain more value for longer.