It’s easy to be seduced by the soft leather and horsepower of a new car. But factor in the annual running costs and your pension before accelerating away.
By Judith Parsons
Whether your car is a necessity or a luxury, it’s likely to play a large part in your life as you journey toward retirement.
Lilly Dew, who lives in the small Welsh town of Crickhowell, says: “My car is my independence. I’m in my 80s and recently upgraded to a smart sporty model in black. If I don’t have the car I really want now, then I never will. I feel good in it and it makes me feel younger.”
Before treating yourself to a new car, set a realistic budget. According to the Office for National Statistics , motorists spend an average of £1,679.60 a year on running costs, excluding finance payments and depreciation.
And don’t let your heart rule your head. Does practicality top prestige? Is safety, reliability or passenger space important? What about sustainable fuels? You may want a showstopper, but you may also appreciate comfort, ride height, ease of access, power steering or park assist technology.
Baby boomer, Chris Munro, explains: “Living in the rural county of Ceredigion, my car is my lifeline, but I’ve recently changed models for logical and safety reasons. I opted for a small SUV (sport utility vehicle) that gives me greater all-round visibility on country lanes and is higher off the ground, making it easier to get in and out. With non-specific aches and pains, I chose an automatic that is much easier to drive.”
Get your timing right
There are smart ways to keep costs down – and timing is everything. Once you know what you want and have weighed-up the pros and cons of buying through a dealer, a broker or privately, keep an eye on the calendar as there are seasonal nuances in the car trade. Get it right and you could save thousands.
According to the Money Advice Service, many dealers offer bargains in February and August as sales slow ahead of new number plates arriving in March and September. However, if you take advantage of this lull, remember that your number plates will make your car seem older than it really is, so it will depreciate faster.
Alternatively, the service suggests finding out when new or ‘face-lifted’ models are due out, then buying the previous version during its last few weeks in the showroom. Dealers will want to shift stock and you could get a good deal.
Other avenues include pre-registered vehicles that a dealership has registered to itself to appear as though it has sold more.The car will look and smell brand new, but because it’s pre-registered to the dealer, it’s technically second hand, so the warranty and breakdown cover will be reduced. The beginning of March is the best time to look out for a sizeable discount.
If you find it hard to haggle, websites such as carwow.co.uk and autobid.com may be the answer. Register the car you’re interested in and dealers around the country will bid for your business.
Check for benefits
For competitive insurance, check the comparison websites first and remember that some companies offer policies specifically for older drivers. On average, says Which?, car insurance prices fall as you get older, but this trend reverses once you reach your late 60s and 70s as premiums start to rise.
If you’d rather be assessed on your driving ability than your age, telematics insurance can keep costs down. For example, an easy to download Aviva Drive App automatically tracks and scores your driving and, depending on your result, you could get up to 28% off your policy.
There’s even a way to stay on top of fluctuating fuel prices. Use free online searches via, for instance, Petrolprices.com or Confused.com to find the cheapest petrol or diesel in your area.
Reassurance on the road
There are no laws to say when you should stop driving, but you do have to renew your licence at 70, and every three years after that. You might also want to check your skills are still up to scratch.
It’s easy to book an assessment through your local council, RoSPA or IAM RoadSmart. This involves an hour’s driving in your car with a qualified expert for an impartial and confidential second opinion. There is no pass or fail, and it usually costs £45-£55.
As driving instructor Eddie Osei says: “After years of driving, some bad habits may have crept in, such as driving with one hand on the wheel. It’s inevitable, but as you get older, your reactions slow down. Instead of following the two second rule, make it three and give yourself the space to respond safely. An assessment is a good way to be reassured.”
Lure of the lump sum
Since pension freedom rules were introduced in April 2015, anyone aged 55 or over can take their entire pension pot as a lump sum, paying no tax on the first 25%. The chance to pocket this amount is tempting, especially for a car. But slow down and think about your cash flow and the broader tax implications.
There could be other ways to finance your gleaming purchase. It may be better to take your pension money in smaller portions over several years. Or more tax advantageous to spend money from your non-pension savings first while interest rates are low. Alternatively, you could top up from an ISA. A conversation with Aviva’s financial advice service can help you decide.
Whatever approach you take, the cheapest way to fund your new wheels is with cash. If your savings won’t stretch to the full asking price, a dealer is likely to offer hire purchase, a personal contract purchase (PCP), a personal contract hire (PCH) or 0% finance. Check the pros and cons of each before you commit.
Other options exist – with a clean credit rating, a personal loan may work out less costly than dealer finance. Alternatively, if your dealer will accept credit cards, and your provider offers 0% interest, you could pay it off within the interest-free period and benefit from credit card protection.
So, whether it’s a run-around or a luxury ride you’re after, remember you’re in the driving seat. Put on the brakes while you consider your options, then it’s full speed ahead…