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Getting a new car involves all sorts of considerations and calculations, but keeping 鈥榗ost to change鈥� in mind can help make you the right decisions

The motivations for changing cars vary enormously from person to person, as do the requirements people have when looking for a new vehicle.

But regardless of if you want something faster or need something more practical, and whether you鈥檙e after an SUV or a supercar, a key concept to keep at the back of your mind as you begin the car-buying journey is the 鈥榗ost to change鈥�.

What does cost to change mean?

The clue is clearly in the name: cost to change boils down to being how much money you will need to pay to get the new (either brand-new, or new to you) car you want, and move your old one on 鈥� assuming you鈥檙e not buying your first car or keeping your current one as well.

But beyond that simple explanation, cost to change is as much a mindset as it is a calculation, and applying it to all aspects of the car-buying experience can help you get a better deal.

Cost to change: buying a new car

Setting a budget is one of the first steps to take when looking for a new car; your budget is likely to be either a lump-sum amount (EG 鈥淚 have 拢10,000 to spend on a used car鈥�), or monthly, meaning you鈥檙e prepared to spend, say, 拢400 a month on finance repayments.

We鈥檒l assume, for the sake of argument, that you have a car you want to get rid of when purchasing your new one. We鈥檒l also assume that whether you鈥檙e paying for a car outright or are taking out a PCP deal, you will be using the same method you used to fund a new vehicle as you did your current one 鈥� IE you鈥檙e not moving from finance to outright purchase, or vice versa.

Buying outright
This is a fairly simple calculation: the cost to change is the cost of the car you are buying, minus any discount you are able to haggle, minus how much you are able to get for your old car.

Even so, do bear in mind the big picture: dealers will balance out how much they will give you for trading in your car against any discount they are able to offer on the car you are buying.

It鈥檚 also worth highlighting that you may well be able to get more money for your old car if you sell it privately before or after you buy the new car, or if you use a car selling service like carwow鈥檚 sell my car.

As an example, if the car you are selling is worth 拢3,000 and the car you are buying is 拢10,000, the cost to change is clearly 拢7,000. The dealer may achieve the same result by offering you 拢2,500 trade-in on your old car, but applying a 拢500 discount to the car they are selling.

Buying using finance

Around 90% of new-car buyers use PCP finance to fund the vehicle, and the cost-to-change calculations for this are a little more complicated than they are for buying a car outright.

Dealers tend to be able to offer far greater flexibility with finance deals: deposit contributions can shrink the car鈥檚 outright purchase price, bringing down monthly repayments as they do so, while you may also find lower interest rates available with some specific choices.

Plus the larger the deposit you can put down, the less money you will be financing, hence the reduced interest you will pay over time.

The cost to change when using finance comes in two stages: the first is the one-off deposit you will pay, and the second is the amount you will be paying each month.

As an example:

Your old car cost 拢30,000 and was bought using finance. You managed to secure a 0% interest deal and put down a 拢5,000 deposit, while the optional balloon payment was set at 拢10,000 鈥� though you鈥檙e not paying this, as you are getting a new car instead of buying your old one outright.

That left you borrowing 拢15,000 to fund your old car, which you paid 拢417 a month for over 36 months.

When you come to get your new car, though, in this scenario your old one did not depreciate quite as heavily as it was predicted to, and the car is actually worth 拢12,000 instead of 拢10,000. This means you paid off more than it depreciated (having paid off 拢15,000 over the three years), and assuming you stick with the same car brand, you can use the extra 拢2,000 to fund the deposit on a new car.

The new car you want to buy is 拢35,000, but as well as having the 拢2,000 left over from your old deal, the dealer is offering a 拢2,000 deposit contribution. You鈥檝e also managed to secure another 0% interest deal, and have 拢5,000 to put down as a deposit contribution. This effectively gives you a 拢9,000 deposit.

Let鈥檚 say this new car is predicted to depreciate far less quickly than your old one and will be worth 拢17,000 in three years鈥� time. That, combined with the 拢9,000 deposit you鈥檝e managed to pull together, means you鈥檙e financing 拢9,000 over three years.

That leaves you with a monthly repayment of just 拢250, compared to the 拢417 a month you paid on your old deal. In total, your purchase cost to change will be 拢14,000 over three years.

Details are crucial

The above example assumes all things work in your favour 鈥� 0% interest, a chunky slice of 鈥榚quity鈥� built up over your previous PCP deal, and a generous deposit contribution from the dealer for the new car.

Let鈥檚 look at a reverse scenario:

Your old car was worth precisely 拢15,000 at the end of the deal so you had no equity; the dealer for the new car offers no deposit contribution; the only deal you have on the table brings 6% APR interest. And while the car has the same 拢35,000 price tag, it depreciates more heavily so is only predicted to be worth 拢10,000 in three years鈥� time.

You still have a 拢5,000 deposit to put down though but this, coupled with the new car鈥檚 heavier depreciation, means you need to finance 拢20,000 over three years. This would leave you with a monthly repayment of 拢555.56, but the 6% interest rate kicks your monthly repayment up to 拢675.36.

Your cost to change is, therefore, 拢5,000 on the day 鈥� but your cost to change on a monthly basis is actually 拢258.36 extra compared to the 拢417 a month you were paying for your old car.

In total, your cost to change in this scenario is 拢29,312.96 over three years 鈥� more than twice as much as the best-case scenario outlined above, despite the fact both cars have the same sticker price.

Cost to change: tax and insurance

The two costs will be less significant than the ones outlined above, but it鈥檚 still worth taking them into consideration.

Be sure to research insurance costs for any new car you鈥檙e thinking of buying, and factor this into your budgets. The cost of cover can vary enormously between different cars, and even the same model of car can have significantly different insurance costs depending on what engine and options it is fitted with.

It is quite possible to move from a car that costs 拢400 a year to insure to one that costs 拢800, with that difference coming to 拢1,200 over three years.

Also bear in mind road tax: the first year of this on a new car will be included in the car鈥檚 purchase price, and is determined by how much carbon dioxide it emits.

After this first year there is a flat 拢165 annual road-tax fee, though remember that if the car costs 拢40,000 or more (options count towards this) it will attract a 拢355 surcharge that runs for five years, from years two to six of the car鈥檚 life. This will add an additional 拢1,775 to your cost to change if your previous car did not attract this additional levy.

Cost to change: fuel and maintenance

Again, while this area of cost will not be as large as the car purchase price, it can still have a significant bearing on your cost to change.

Let鈥檚 say you cover 8,000 miles a year and your old petrol car managed 40mpg on average. Taking petrol at 拢1.65 a litre, your annual fuel costs will be 拢1500.21.

If you buy a new, faster car with a larger engine that only manages 30mpg, your annual fuel bill will rise to 拢2000.31, equating to an extra 拢1,500 over three years.

Maintenance costs also come into play when considering the cost to change, and it鈥檚 well worth weighing up if a new car you are considering has high servicing requirements; the more expensive and higher performance the car is, the greater its maintenance costs tend to be.

Car companies sell service plans that cover scheduled maintenance on a vehicle for a number of years, which will help you balance the bills.

It鈥檚 worth factoring in the cost of tyres as well: larger, heavier, higher performance cars need larger, higher-performance, more expensive tyres, which can catch people by surprise. A decent set of tyres for a mainstream car might be 拢100 a corner, while performance tyres can easily be 拢250 each.

Cost to change differences

We鈥檝e deliberately chosen opposite ends of the spectrum in our scenarios, and have done this to demonstrate just how much different thinking about the cost to change can have on your outgoings.

Totting up the total costs over three years for the two scenarios above, bearing in mind both cars have a 拢35,000 list price.

We鈥檒l assume each car needs one set of tyres over the three years, and that one鈥檚 service plan was twice the cost of the other鈥檚 (this is more than feasible).

	Car A	Car B	Difference
Finance costs	拢14,000	拢29,312.96	拢15,312.96
Fuel	拢4,500.63	拢6,000.93	拢1,500.30
Insurance	拢400	拢800	拢400
Road tax	拢495	拢1,560	拢1,065
Maintenance	拢300	拢600	拢300
Set of tyres	拢400	拢1,000	拢600
Total	拢20,096	拢39,273.89	拢19,178.26

So there you have two 拢35,000 cars, one of which cost you a total of just over 拢20,000 over three years, and one of which cost you almost double that.

Yes, it would be fair to say that we鈥檝e taken extreme examples in order to illustrate our point, but both are within the realms of possibility, and highlight the importance of thinking about the cost to change in a holistic sense.