How much did you spend on your first car? Many of us will have handed over a few hundred pounds at most just to get our young hands on a car of our own, even if it had seen better days and was hardly the most prestigious car on the road.
Well, things have changed these days, with a generation gap when it comes to car-buying habits. One in five 18-24 year olds, rather than buying a used and fairly old car, now chooses to lease their car. This is more than double any other age group, with just 5% of 41-45 year olds, and 6% of 46-50 year olds choosing this type of credit.*
Older people – those who may have started with a relative old banger – are more likely to use cash or savings – up to 70% amongst those aged 61 and over. Meanwhile younger drivers appear to be taking advantage of affordable credit deals to skip a step, and move straight up to newer, more desirable models.
Young, fast and borrowing money
It may surprise many to learn that more than half of 18-24 year olds say they drive cars worth between £11,001 and £20,000, meaning those opting for credit deals are taking on significant financial commitments to fund their more expensive tastes, many buying a car that’s less than a year old.
However, the reality of having to pay off high valued vehicles seems to quickly hit home – with just 11% of 25-30 year olds surveyed driving a car they purchased from the showroom. Those celebrating their 46th birthday and beyond appear to be prepared to splash out on the finer things in life – with 33% of 46-60 year olds buying new cars.
The survey also shows that the older the driver, the less they’ve paid for their current car. Older generations paid a lot less when they first became car owners – the majority of those aged 41 and above paid less than £2,000 for theirs.
Ensure your credit report is in shape
Experian Expert James Jones says: “It is important that those seeking credit ensure their credit report is as strong as possible. A strong credit report will help them get access to the best deals they can afford, which could save them money in the long-run. With younger drivers buying high-value newer cars, often with less experience of managing credit, it’s vital those who do opt for credit understand the importance of repaying what they owe on time and in full each month after they’ve left the garage.”
Check out our step-by-step guide to the car buying process to help you understand the best option that suits your circumstances and credit history.
If you’re planning to buy a car, here are four key tips for making sure your finances are in place:
- Do your research: Use calculators and comparison websites to understand the different options available, find out where the best deals are and what type of arrangement will suit your circumstances. If you are purchasing a used car, it is worth considering getting a provenance check. It’s affordable and can tell you whether your car has been stolen, written off, or has outstanding finance on it.
- Check your credit report: As soon as you make the decision to buy, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances, including the exact way your address and other personal details appear on your credit report. Small inaccuracies could see your application turned down, so don’t overlook the details. . If you spot anything you believe to be inaccurate, contact the relevant lender and ask them to investigate the entry.
- Room for improvement: If your credit report has areas for improvement, make a plan to get it into shape well before making your loan application. There are a number of steps you can take, including: ensuring you’re registered on the Electoral Roll; paying off more than the minimum repayments on your accounts each month and making sure never to miss a repayment. Improving your credit rating will put you in a strong position to get the best deals you can afford.
- Don’t overlook the details: Buying a car on credit is an investment that costs more than just a deposit and monthly repayments. Before you sign on the dotted line, make sure you’ve considered the additional costs and that you can afford to repay everything you’ll owe when you make the purchase. Additional costs might include: Insurance, Fuel, Maintenance and road tax. Meeting your monthly repayments on time should help keep you on the road to a strong credit rating, too.
*Research was carried out online by Canadean in October 2015 among a sample of 1,000 UK adults.