But it seems to me there are much better offers for new cars (lower monthly payments, maintenance plan etc). Is it better to get a new one, and deal with the residual later, or pay more now to fully own it after five years, but worry about maintenance costs etc?

Answer:
One word. Residual.

If you can afford it, never, ever buy a car on residual, even if it means opting for a cheaper car than you were thinking of getting. When you buy a car on residual, you don't pay off the entire cost of the car over your repayment term. Instead, you pay off a smaller amount, and undertake to pay the residual at the end of the term, usually by trading in the car.

Because of the residual amount still owing, your monthly payments are more affordable. But during this time, you pay interest on the full amount owing, including the residual amount, so you end up paying a lot in interest charges.

It's always in your interest to put down as large a deposit as possible when buying a car. Many people afford the deposit by trading in their previous car. However, if you buy on residual, you end up trading in your car to settle the debt, and have no deposit to put down on your next car.

Ultimately, it's a good idea to work towards a situation where you can buy a car for cash or by taking on as little debt as possible. And this is easier, and more accessible, than you might think, although it does mean you'll have to scale down your expectations.

New or used?

You'll have to decide whether it's best to buy a new car or a three-year-old one. It's true that new cars have become a lot more competitive, with maintenance plans and lots of extras, but a car that's a couple of years old should still be a good car, provided it's been cared for. It's a fallacy that you need to swop cars every two years or sooner.

You can buy a car from a recognised dealer or through a manufacturer-approved used car programme, which is offered by big names such as Mercedes and BMW. Either of these routes will give you more peace of mind if you aren't confident about second hand cars. You can also ask for an AA certificate from the person you're buying the car from.

Ask around and try and get some idea of what the maintenance costs are likely to be on your second-hand car. (Every second-hand car is different). Total it up and see whether it's still going to be worth it for you.