A bumper time for bargains on wheels

It's getting cheaper to hit the road. Sam Dunn shows how to take advantage of falling prices and cheap finance deals

British motorists have moved into the driving seat when they go to showrooms to buy a car. Low interest rates on personal loans and intense price competition between dealerships have given consumers power to demand - and get - more for their money.

The cost of motoring has also fallen by 4 per cent each year since 2000, according to the AA, thanks to cheaper insurance and the greater energy efficiency of new models. So it's not surprising that car sales are increasing. The Society of Motor Manufacturers and Traders (SMMT) predicts that around 2.45 million new cars will be sold this year. That doesn't look over- optimistic when you consider that 1.1 million cars were sold between the beginning of January and the end of May - only slightly fewer than the record levels achieved in 2002.

Year-on-year new car prices slipped by 0.6 per cent overall in May, with large falls of 2.4 per cent and 2.7 per cent respectively in the cost of multipurpose vehicles and luxury cars, according to the Alliance & Leicester Car Price Index. And plummeting new car prices have also turned up the heat on the market for second-hand cars - including nearly new (less than one year old) and used (more than three years old) - meaning there are plenty of bargains out there.

This shift in the motorist's favour is welcome, as up until recently, the only way to get a good deal was to import a car from the Continent. But that changed with the recovery of the euro, which has risen by 8 per cent against the pound since January, pushing up the cost of imports.

That is less of a worry than it might have been because it is now a buyer's market at home. And the bargaining power of the motorist extends not only to the purchase of the car itself, but also to the financing of the deal and to motor insurance.

New deals are constantly coming on to the market, so how should you go about finding the best one? You might start by looking online, though you should use the internet for research rather than for actually purchasing a car, advises Liam McCormack, head of products at Which? And, when you're browsing, remember to check whether "on the road" costs such as registration fees, number plates, delivery and warranty are included.

"If you go to a dealer armed with enormous amounts of research from the web, most will come some way towards matching those prices," says Mr McCormack.

"You should haggle on the car and on the annual percentage rate [APR] if you take out finance."

For even greater bargaining power, an SMMT spokes-man suggests you opt for a popular model such as the Ford Focus, Britain's biggest-selling car: "Because of their popularity as [company] fleet cars, you can get a really great deal as a private buyer if you are not fussy about colour or exact specifications."

Unfortunately, if your heart is set on finding the high-performance model of your dreams, you are less likely to be able to drive a bargain.

There's no point haggling to reduce the purchase price of your new car if you then pay over the odds on the financing, so make sure you compare a range of personal loans and don't just sign up to the deal on offer at the showroom.

"Quite often, people will get carried away by the process of buying a new car and buy into the 0 per cent finance and warranties, rather than considering the alternatives," says Luke Bosdet, a spokes- man for the AA. "If you can be a bit more canny, there are a whole range of loans out there. Spending a couple of hours on the web will come up with something."

Online quotes for car leasing - with an option to buy the car at the end of the lease period - are also available from Sainsbury's Bank. You will be offered a flat APR and can choose from a range of nearly 4,000 cars.

To check the cost of running a car, take a look at the AA's "running schedule" tables at www.theaa.com, where there is also a "petrol busters" facility to help you find the cheapest petrol station in your area.