Buying a car

Finding the car that’s right for you

Buying a new or used car requires an upfront investment and you want to be sure you don't get a lemon. There are even more questions with a used car, but whichever car you're interested in, you should do your homework and learn about the pros and cons of the model you want. After all, a little groundwork now might prevent an expensive mistake later on.

Buying a new car

The good bits: A new car is great because it'll come with a warranty so you'll only have to pay for regular servicing. If anything goes wrong, the car will be fixed and the parts replaced free of charge.

The bad bits: Depreciation is a huge hidden cost. By the time you've driven off the dealer forecourt and out onto the road, it could have lost a whopping 20% of its value, as the car becomes technically 'used'. So it pays to do your research and buy a model that holds it value.

Questions to ask about a new car

- What comes as standard?

- What are the on-road costs?

- How long is the warranty?

- Are there any promotional deals on?

Buying a used car

The good bits: A second hand car is cheaper than a new one so you won't have to spend so much to get the freedom you want.

The bad bits: You don't really know the history of the car and even though you'll get it checked out, you'll never really know how it's been treated in the past.

Questions to ask about a used car

- Why are you selling the car?

- How long have you had it?

- How many owners has it had?

- Do you have receipts for all work done and a full service history?

- How many kilometres has it done?

- What’s it used for? Is it used everyday or just at weekends?

- Has it ever been in a crash?

- Is there any debt on the car?

- Any objections to me getting it inspected?
 

Choose a reliable make and model that holds its value

It might cost you a few more dollars to start with, but a car with a good reputation is less likely to break down every 5 minutes, and it will hold its value far better in the long run. Do your homework, and ask friends and family who might be in the know.

If you know the right price for the car that's caught your eye, you're far less likely to get ripped off. Good places to check car values are:

• www.redbook.com.au
• www.glassguide.com.au
• www.carsguide.com.au

 

Get it inspected

It might look nice and shiny on the outside, but rogue traders know every trick in the book to disguise expensive or even dangerous faults beneath the gloss. So don't just lift the bonnet and kick the tyres to give an impression you know what you're doing. Get the car properly inspected, either by your state or territory motoring club or someone you trust if you can't afford to pay for an inspection.

Check it’s debt-free

Depending on where you live, you can find out if the car you are thinking of buying is carrying a debt. So if you don't want your new car repossessed or find yourself having to clear someone else's debts, check the website below, which covers all states and territories.

www.revs.nsw.gov.au

Be careful at auctions

It's best to steer clear unless you really know your stuff. It's easy to get carried away and once the hammer falls it's legally yours, like it or not. While it can save you money, it can also come with serious consequences. Cars that would fail an extended road test are often sold at auction and as the buyer you take all the risk. Make sure you check the auctioneer's terms and conditions before you bid. Some have high auctioneer's fees and the difference between buying at auction or through a dealer may not be worth the extra risk involved. If you do feel you want to take your chances, make sure you do a trial run and bring someone along with you who really knows their cars.

Borrowing or saving for a car

Borrowing: You get your car now and pay it off in instalments, which is great if you have a regular income. You pay interest on what you borrow. A personal loan can be an ideal solution if you don’t want to wait to buy a car.

Saving: There's no interest to pay. It takes time to save up so you'll have to wait for the car you want. You'll lose a lump sum from your savings and any interest you would have earned on that. Options to help you reach your savings goal faster include our NetBank Saver or GoalSaver accounts.

A mix of the two might be best, where you borrow less and keep interest repayments at a minimum, but get the car of your choice now.

Did you know?

If you take out a personal loan for your car, you have the option of using a 'guarantor'. This is someone who will guarantee loan repayments (usually a parent) if you don't meet loan conditions. It's a great way to improve your chances of getting a loan.

Negotiate a price

If you've done your homework on market values; if you've asked the important questions and had your questions answered properly; if you've physically checked the vehicle; if you've arranged an inspection by an expert; and if you still think the car is good value, then you're ready to negotiate.

While it's true that some people are better at negotiating than others, it's an important aspect of buying a car and it's easier than you might think.

Also, be patient. Walking away is your right as a buyer and you should be prepared to walk if you feel pressured or uncertain. Take time to think about the car overnight, it can take the emotion out of your decision and you can make a rational choice based on the facts.

You’re ready to negotiate if you’ve:

1. Done your homework on market values.
2. Asked all the relevant questions and received adequate answers.
3. Physically checked the vehicle to the limit of your ability.
4. Had an expert inspect the vehicle (if second hand).
5. Prepared yourself financially to pay the purchase price, or at least a deposit.

Paying up

Once you've agreed on a price, you should be ready to pay the deposit. The deposit means the car is no longer for sale and the seller shouldn't show the car to anyone else. Don't be too generous with your deposit - 10% is usually more than enough - and make sure you get a receipt that identifies the relevant parties, the date and the amount paid.

The golden rule is to trust your instincts - if you think something is dodgy, keep your cash in your pocket and keep looking.

On road costs

On top of the purchase price of your car, you need to budget for 'on road' costs, which means your car is legally able to be driven on the road.

• Stamp duty - a percentage of the purchase price that goes back to the government
• Car insurance - such as comprehensive insurance. Although you're not legally obliged to take it out, it's a very good idea
• Green slip - Compulsory Third Party personal injury insurance (NSW only)

And three extra costs if your car is new:

• Number plates
• Registration
• Dealer delivery

 

Ongoing costs

The ongoing costs of running a car can burn a real hole in your pocket. Make sure you budget accordingly. You should factor in petrol, new tyres, yearly registration and servicing. To see how to find the best value petrol, visit sites like www.motormouth.com.au.

Why you might want car insurance

Yes, it's yet another expense you could do without, but taking out some form of car insurance is important. Depending on the cover you choose, it can provide financial security if your car is involved in an accident, damaged or stolen. If you don't have car insurance you could personally have to pay for any damage you caused or even keep paying for a loan if your vehicle is stolen and never recovered. Get a quote on how much insurance could cost you for the type of car you're interested in.