Thinking of a new car or time to update? Not too sure whether to contract or purchase? Unsure which one is best for you?
Sifting through the minefield of information can seem like a second job so here is our guide to help you through the process.
How much does it cost to run my vehicle if I purchase?
It largely depends on the car you choose and your needs as an instructor.
The owner-driver route can seem attractive as you will eventually own your vehicle outright. You can work out the average yearly cost using the following ‘common sense’ formulae:
Average yearly cost = Cost of car – Predicted future value + Interest + Maintenance
How long you are planning to keep the car for in years
Cost of the car. The average cost of a new car is around £23K+, there has been a massive increase in cost over the last 10 years due to high demand of materials as well as inflation. Car dealerships usually get discounts from manufacturers due to the bulk they buy in, this allows them to sell brand new vehicles at a lower price than the manufacturers dealerships. Adding extras on such as a spare wheel (not always standard in modern cars) will increase the total price. If you plan to keep the car after the standard manufacturers’ warranty expires, checking both mileage and vehicle age restrictions, extended warranties are worth looking at. We include the fitting of dual controls in our price but please be aware not all car dealerships do, resulting in added costs.
Predicted future value. Be realistic about the likely resale value of your vehicle with your predicted final mileage. Online sales sites such as Autotrader can help to give you an indication. Bear in mind that cars with high mileage hugely depreciate especially as they will probably be out of warranty e.g. a two year old car with a 60k mileage will be worth about 40% of the manufacturers’ list price. Used cars can depreciate less but the maintenance spend tends to be more, so a careful balance will need to be achieved.
Interest. If you have not saved the money, you will need to factor in the cost of borrowing. Sometimes getting a loan from the bank ‘personal loan’ tends to be cheaper in the long run due to the lower interest rate, however finance usually allows you to have lower monthly repayments but over a longer period with a higher interest rate.
Maintenance. When you are using your vehicle for long periods of time every day, maintenance is very important. You will need to be realistic regarding these costs as its not just servicing, it will need new brake pads and discs, tyres, clutches. Also consider what happens if the car needs repairing. High average annual mileage coupled with an ageing vehicle contributes to accelerated parts replacement with repairs taking longer as parts become obsolete. This can be a large unforeseen cost, so you will need to have ‘rainy day’ funds readily available at short notice to keep you on the road.
Other things to consider. Factor in what you will do if your car if off the road for a period of time. Will you hire a costly temporary vehicle or will you take time off, grinding your business to a halt.
So what about contract hire?
Contract hire deals are set monthly fee for the use of the vehicle for an agreed period of time. At the end of the agreement provided that the car hasn’t gone over the mileage allowance that was originally agreed and is in a reasonable condition, the car is simply handed back.
Not all contract hire schemes are the same so you will need check to what is included. Specialist driving instructor contract hire schemes tend to have similar offerings but how they provide these services may differ. These inclusive packages include everything from service, maintenance and worn tyres, the vehicle fitted with dual controls, breakdown cover and replacement vehicle with dual controls should yours have to come off the road. Free of charge nationwide delivery is often included.
However some non-specialist companies may not include the same service within their contracts, even if they are called ‘maintained’. To help compare different deals use our contract hire checklist.
Finding the right contract hire for you:
- Is it really contract hire? Don’t confuse with purchase schemes such as personal contract purchase (PCP).
- What is the length of contract? Keeping the car within manufacturers’ warranty, even if it is on a maintenance package, will generally provide you with a better experience.
- Confirm all costs and when they are due: Any initial payments, regular payment amounts and frequency, and any end of period costs, such as excess mileage, just in case.
- What’s included in the package? Does it cover servicing, maintenance, dual-controlled replacement if your car if off road, breakdown cover, dual controls supplied and fitted. Is there an option for driving school insurance. What is the fair wear and tear policy? Does the package include free nationwide delivery?
- What are the end of contract options? Is the renewal process made simply for you as an existing customer? Is there an option to purchase the car after? What happens if you do not take another contract?
As contracts tender to shorter than purchase schemes you can update your vehicle regularly allowing you to keep up with the latest technology and safety features as well as keeping a professional image for the school. Also, the monthly payments can be offset against your companies’ taxable profits.
Being flexible can bring its advantages
If you are not tied to a specific vehicle, being flexible regarding the manufacturer can help you achieve the best deal. Once you decide the size of car, the preferred fuel type, your vehicle equipment requirements (both in terms of wants and needs) and your preferred contract length, you can shop around for the best deal. Flexibility can result in savings of hundreds of pounds. Taking a slightly longer contract can help to ‘fix’ your cost, avoiding swap over days, insurance administrations costs and additional signage costs. It can also avoid future price rises as car prices only tend to increase.
Over the years your needs may change as you might change from teaching manual to automatic, you may decide you want a bigger or smaller car to teach in or your preference of what you want in a vehicle may change. Contract hire allows you that flexibility to update every couple of years rather than being restricted to one vehicle until you can financially afford updating.
See our full range of dual-control cars for hire and dual-control cars for sale.