Wallet Watch: how to save on your next car

Today we're looking at:

Saving money on a new car - always popular, particularly in these credit-crunched, scrap scheming times.

There are of course a vast, vast number of ways to save money on a car, many of them dependent on the particular needs and economic circumstances of the individual, so this is just a rough guide; it's a starting point for those looking for the best deals. So, here goes...

Your options are:

Scrap scheme

Obvious, we know, but for those who adhere to the specific caveats linked to the scheme it can often - but not always - be the best choice. As of 20th September there were 227,750 cars registered under the scheme, but the Government announced yesterday (September 28th) that the scheme would be extended, so now you have more time if you want to exchange your ten-or-more year-old banger for a nice £2,000 discount.

Choose wisely though, because as attractive as that sort of discount sounds, manufacturers are clever at clawing that money back in various ways. Watch out for unscrupulous dealers bumping up the finance rate on a car bought through scrappage, for example, and be aware that the £2,000 comes off the car's list price; only when a car is extremely popular will it sell for list.

On that basis, however, a scrap discount on the Fiat 500 or the MINI could be good value. Fiat has already told Yahoo! Cars it wasn't happy about they scheme because it was 'forced to discount' its fashionable city car. Look at all your options before signing up.

Car broker

Internet brokers are renowned for offering massive discounts when compared to a dealer's forecourt price, so if you can find the car you want and have the money set aside, this could be the way to go. The drawback is that you're limited to cars actually in stock at the broker (so colour and spec choices are limited), and you're not getting the warm and friendly face-to-face customer service that dealers provide (all the time, obviously).

There are plenty of deals out there, and these days all it takes to find them is a search engine - Yahoo! for instance - to locate the car you want and compare prices. The Ford Focus, for example, can be found in a variety of specifications and engine sizes with up to £6,000 off the list price.

Car supermarket

Car supermarkets provide, in theory, the benefits of both a broker and a dealer, offering dealer-like service and discounted rates - on both new and used cars. (It's easy enough to register your car with the service department of a local dealer once you've bought it too.) You're also able to test drive a car before you buy it - something you should always insist on, particularly for a used car - and there's room for haggling on the price, even though they're generally lower than main dealer prices already.

However, cars are sold 'as seen' - which means there's only the remainder of the manufacturer's warranty as comeback - and you need to be aware of hidden charges on top of the sticker price.

Nearly new

Buying nearly new precludes you from getting the scrap discount, and will of course mean you're only getting the remainder of the manufacturer's warranty - if there's any left. However, we're all aware of the old adage that a new car 'loses thousands the second it leaves the forecourt', which means that buying nearly new is a way of avoiding that massive hit.

That said, while cash buyers will benefit from the savings of a nearly new car, often dealers will reserve the best finance rates for new cars - sometimes 0% for a certain period - and some of the finance methods available for new cars - like monthly leasing - aren't available.

Personal loan

Car dealers are always quick to offer their own finance solutions with a new car, but this is often a way of clawing back any discount that they may have given against the list price. Hire Purchase, for example, often requires a minimum 10 percent deposit then an agreed number of monthly instalments. But, dealers are usually brokers for a finance company and the interest charges reflect that. There's a bigger first payment (an 'administration fee') and final payment (an 'option to purchase' fee) plus you won't actually own the car until the last payment.

Your bank will often offer you a far better rate of interest on a loan, using which you can go to the dealer with cash, negotiate a bigger discount as a cash buyer, and own the car from the start.

Confidence

If you have your heart set on something you've seen on the forecourt it's easy to be blinded by desire and forget that it's you, not the dealer, that's in control. Don't be fooled by 'this is a one day only deal' talk or other salesman patter; have the confidence to walk away if you're in any way suspect you're not getting the best deal. You should always ask for some sort of discount, and don't be afraid to play one dealer off against the other - showrooms are desperate for sales at the moment, so use that to your advantage.

Timing is key too: buying a car on the day of a registration plate change in March or September is not a shrewd as doing so during a traditional sales lull - around Christmas, for example. Try not to be tempted by having a brand new plate on your car and you'll find there are bigger savings to be had.

Mark Nichol