Buying a car in retirement

How to buy a car in retirement

A car can be the second most expensive thing we buy, after our house, so choosing and buying a car is not something to rush into. It’s perhaps an even bigger decision for retirees, when our needs from a car can be quite different to other times in our life.

We identified buying a car in our list of the reasons people choose equity release, and we know that having a reliable and efficient vehicle is a must-have for many people looking to make the most of their retirement. 

With that in mind, we’ve put together a guide on how to buy a car in retirement, covering the main things to consider:

• What will driving in retirement look like for you?
• What’s the best type of car for your retirement?
• Should I buy a new car after retirement?
• What about nearly new or used?
• How to pay for a car in retirement
• Does retirement affect car insurance?

What will driving in retirement look like for you?

Before choosing and buying a car in retirement, it’s a good idea to think about what your driving will look like in the years ahead. That starts with considering how many miles you’re likely to be driving each year. 

It’s easy to jump to the conclusion that everyone does fewer miles in retirement. That may be true for people who previously commuted to and from work. But some people seize the opportunity of retirement to get out and explore the UK or Europe on driving holidays now that more free time is available.

Calculating your likely annual mileage might be important when buying a car in retirement, affecting what type of car you buy. Start by working out your likely weekly mileage:

• Your daily drive – even if you no longer commute to work, do you pop into town every day?
• Shopping trips.
• Visits to friends, family and social groups.
• Giving lifts to friends or neighbours.

Once you’ve worked out a typical week’s mileage, add a few miles for contingency and multiply by 52 to get your day-to-day annual mileage.

Next, add in extra journeys such as:

• Day trips to the seaside etc.
• Weekend breaks and holidays.
• Driving abroad.

Alternatively, if your current driving habits are unlikely to change, you can use the mileage recorded on your MOT certificates as a guide. 

Although you may not be commuting, it’s amazing how busy retirement can be – and that often involves driving. Make sure you make a realistic assessment of your annual mileage if that’s likely to affect how to buy a car in retirement for your own circumstances.

Petrol, diesel or electric?

Your annual mileage will likely be relevant to your first decision when buying a car in retirement: what type of engine will it have? 

Experts tend to suggest steering clear of diesel cars if you will mostly be making short journeys. That’s because of the diesel particulate filter (DPF). This needs the car to be regularly driven at operating temperature, which can take 15 minutes or more to achieve, and frequently at 40 mph or faster. It’s why petrol may be a better choice if you usually make short trips.

When it comes to electric cars, some people love them and others are just as sure that they are a terrible idea! What’s needed is a careful weighing up of the cost of purchase vs potential fuel savings. With electric and petrol/diesel prices so volatile, this is perhaps easier said than done. 

The other important factor is the maximum range an electric car can travel on a single charge. The good news is that some of the latest electric cars can drive much further on a charge than was previously possible. 

However, an impressive range comes at a cost. The cheapest car in a This is Money list of electric cars with the longest range is the Tesla Model 3 at £50,990, with a maximum range of 405 miles. The car with the longest range in its list at a maximum of 464 miles is the Mercedes EQS, costing an eye-watering £105,610.

Of course, range might not be a big issue for you. In that case, a less expensive electric car with a shorter range might be an option. The Skoda CITIGOe iV for example starts at around £20,000 and delivers a maximum 160 miles on a single charge.

What’s the best type of car for your retirement?

The next choice is all about body style: should you go for a hatchback, saloon, estate, SUV, or maybe a sporty two -seater? You don’t need us to tell you whether you need a big or small car, but it’s worth thinking ahead when buying a car in retirement that we hope will last for many happy years. 

If your ‘retirement car’ is something you’re buying for the long-term, think about whether your circumstances and needs may change in the years ahead. This includes considering whether you are likely to take children, grandchildren or friends on journeys. It’s easy to be tempted by the cost and convenience of a three-door runabout, but they do tend to sacrifice comfort for passengers.

Mobility and access may also affect your choice of a car, such as whether getting in and out of the vehicle is an issue. Don’t forget also safety, ease of parking and your need for storage space in the car. These are all factors to think about when considering how to buy a car in retirement.

Manual or automatic?

An automatic car can be a good choice in retirement. Automatic cars are less physically demanding than manual cars, especially for city driving on busy roads requiring frequent gear changes. If you suffer from a condition such as arthritis, the reduced strain on your left foot, leg and arm could be very welcome. 

The downside is that an automatic is often more expensive to buy than a manual. Automatic cars have also tended to use more fuel than a manual equivalent. However, Stephen Kelly at car.co.uk says: “Modern automatics with automated clutches or CVT gearboxes produce almost identical fuel economy figures to their manual counterparts – and in some cases, they are even better.”

If you do want an automatic, the improved fuel economy of modern cars may influence should you buy a new car after retirement rather than a used one. There’s more on this subject below. 

If you buy an electric car, the decision is taken out of your hands. Pretty much all electric cars are ‘single speed’ and therefore require no clutch or gears.

Should I buy a new car after retirement?

Advice from experts such as the team at OlderDrivers.org.uk is to buy as new a car as you can afford. The rationale is that a newer car will generally be safer, more reliable and more fuel-efficient.

It’s hard to argue against buying a brand new car if you can afford it. Writing for WhatCar?, Clare Evans lists benefits of buying a new car, including:

• You can choose the exact specification you want.
• You have the protection of a full manufacturer warranty.
• You don’t have to worry about potential problems in the car’s history.

There are many other potential benefits to buying a car in retirement that’s new or nearly new. They include potentially enjoying better fuel economy and reliability, to benefitting from the latest technology and features.

What about nearly new or used?

There are of course downsides to buying a brand new car in retirement. In particular, you’ll pay a hefty premium for a new car and depreciation starts as soon as you drive it off the dealer’s forecourt. With that in mind, let’s look at the alternative: buying a nearly new or used car.

Nearly new cars

You may prefer to opt for a nearly new car. You can slash the purchase cost compared to a new car, and avoid huge depreciation. Buying nearly new also means you can still benefit from much of the latest performance and features of a new car.

When you see nearly new cars advertised, you might notice that they typically have fewer than 30,000 miles on the clock. That’s because when a brand new car is bought on a finance plan, the driver is restricted to a maximum mileage per year. Although some ‘company car’ drivers will put in huge mileage each year, private motorists generally stick to these mileage limitations. 

Another benefit of a nearly new car is that it may still be covered by the original manufacturer’s warranty. Look into this carefully though, as there may be some limitations or exclusions.

Older used cars

There’s nothing wrong with buying a used car in retirement. It just means there are a few additional things to consider, especially when it comes to safety and reliability. 

Start by checking out the car’s history with the free online vehicle enquiry service from the DVLA. This tells you the car’s model, year of first registration, colour and engine size. Any discrepancy between this information and the seller’s description should set alarm bells ringing. 

Another useful free service is the DVLA’s MOT history check service. This records all the vehicle’s MOTs since 2005, or from 2017 in Northern Ireland. The test shows the recorded mileage at each test, whether it passed or failed, the reasons for failures, and whether there were any ‘advisories’ for minor problems.  

For a more detailed report on a car’s history, you can use a paid-for service that includes checks on whether the car has been stolen or written off, and whether there is outstanding finance on it. MotorCheck, and CarVeto are just two of many companies that provide this service online.

If all these online checks look good, and your initial look at the car goes well, you may wish to book a physical inspection from a mechanic. Companies such as the AA, the RAC and ClickMechanic will give the vehicle an inspection. Another option is to ask a trusted local garage to carry out an inspection, perhaps at their premises with the car on a vehicle lift for a thorough inspection of the underside. 

How to pay for a car in retirement

There are several ways to buy a car if you don’t have the cash available for an outright purchase. These include a car loan and finance products such as personal contract purchase (PCP) and hire purchase. There’s also the option of leasing a car, including with a personal contract hire (PCH) arrangement. 

But financing or leasing a car can be difficult in retirement. Lenders and finance companies will want to know that you can afford repayments. They might not require you to be in employment, but they are likely to need evidence of sufficient regular income. If you can’t provide evidence of this, you may struggle to get the finance you need.

This is why you may want to look at equity release as a way to buy a car in retirement. Unlike other forms of finance, an equity release loan such as a lifetime mortgage doesn’t require you to make regular repayments. Instead, the loan is paid back through the sale of your home when you pass away or move into long-term care.

Equity release might therefore be a solution if you are looking at how to buy a car in retirement, where other options aren’t available. However, it is a long-term commitment so needs to be thought about carefully. Also, due to the effect of compound interest, it can be an expensive way to borrow money.

Does retirement affect car insurance?

We’ll round up our guide to buying a car in retirement with a word or two about car insurance. It’s always wise to factor in insurance costs when looking at your options, as it can add significantly to the cost of owning a car.

Retirement affects car insurance positively in many cases, as insurers tend to recognise that retirees are among the safest drivers on the road. Also, if retirement means you cover fewer miles each year, you may get cheaper insurance than someone commuting to work five days a week.

But as always with car insurance, please shop around for the best deals. Not all insurance companies look at retired drivers the same way. In particular, some start to raise premiums once drivers reach their early 70s, according to RestLess.co.uk.

Contacting a few insurers could help you find the most suitable insurance at the best price. Try insurers who offer specialist over-50s policies such as Saga and Sterling Insurance. You can also use a comparison site such as moneysupermarket.com and comparethemarket.com to broaden your search.

How to buy a car in retirement with equity release

Thousands of UK homeowners aged 55+ unlock tax-free cash from their property each year with equity release. You can use the money for anything, once you have paid off any existing mortgage or other secured debts.

Are you interested in exploring equity release as a way to buy a car in retirement, or for other purposes from home improvements to boosting your retirement income? If so, Equity Release Wise can help.

All it takes is a call to our team on 0808 178 3055 or request a call back – we’ll be happy to arrange an appointment with one of our selected advisers for advice on whether equity release is a suitable solution for buying a car in retirement. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.