Having children is a wonderful privilege.. apparently. I certainly wouldn’t disagree but it’s not all a sea of bliss with no negatives. I don’t wish to sound like Ebenezer Scrooge from A Christmas Carol but they can be a bit needy from a financial perspective.
My daughter is a case in point. She’s not a big fan of ‘scrimp and save’ despite being a full-time student. She likes things ‘now’ and the best available. Sometimes this leads to a futile period of negotiation before she usually gets what she wants, but there have been difficult moments when the word ‘No’ has been entered into the conversation.
She’s recently been taking driving lessons and has finally passed her theory test. She’s therefore thinking about what ‘new’ car she would like as her first car. After laughing at her first few suggestions, informing her of the general price and also pointing out the additional cost inconveniences, such as car tax, insurance, breakdown cover and fuel. We did then have a slightly more sensible conversation.
Firstly, she had to learn the words ‘affordability’ and ‘second hand’ (she didn’t like those words). In fairness to her, when at junior school, her friend George promised her a Bugatti Veyron if she would marry him. She wasn’t tempted but quite liked the thought of having the car.
Eventually, we compromised on a more modest option, a VW Polo (but not too old), or similar.
In preparation for my part in the proposed car purchase ordeal, I thought I should do a bit of research. I don’t have great knowledge when it comes to buying used cars. I always check the oil for any tell tale ‘mayonnaise’ like issues, that normally suggests bad news, but I probably wouldn’t spot more subtle problems.
I therefore usually purchase used cars from a dealer, although I have also bought privately in the past, but I always take a friend who’s a bit more mechanically savvy than me. So let’s look at a few of the pros and cons with these two options:
The main advantage is the car should be significantly cheaper than if it were sold via a dealer. Private sellers don’t normally have overheads and they don’t have to offer a warranty. However, they offer few legal protections apart from having to advertise the vehicle description accurately. It’s generally a case of ‘buyer beware’ with little comeback if there are issues, post sale.
Car dealers are a business, therefore they have a reputation they won’t want tarnished. It’s not in their long term interest to try and rip off customers. So they should check that the car is roadworthy and without any issues. In addition they have to offer a warranty and you will also have legal protection if something goes wrong.
The downside of having these extra guarantees and assurances is extra cost. The dealer will also have overheads and will be selling for a profit with sales tax added.
Next I needed to assess car valuations, whether through a private sale or with a car dealer. Without this research I could easily overspend and wouldn’t be able to spot any potential bargains.
Ok now I had an idea of how much money ‘we’ were going to have to find to purchase a car acceptable to all parties. Predictably, we don’t currently have enough. Therefore I would need a car loan to bridge the gap and at a competitive interest rate.
Armed with the basic sums, I found a handy online tool to calculate the cost of repayments. I was able to easily adjust the amount, time frame, interest rate as well as other variables. I estimated I would need about $10000 to purchase the car but I could put down a $5000 deposit. I calculated a loan period of 6 years at a 10% interest rate, giving me a monthly repayment of $92.63. If I bought from a car dealer I would have to add sales tax too.
The site has a number of other useful calculators such as for Leasing and Operating Costs. Inevitably, I ended up playing games in the Arcade section before long. With titles such as Apple and Onion Cat Rescue inspired by the classic Frogger game, I couldn’t resist. A satisfying reward following my hard work!
With the research done and the knowledge I’ve gained, I feel better prepared and less stressed about the whole process to come.
Now she just has to pass her practical test and that may never happen!