- A dream car can quickly become a financial burden if you don't budget for the true cost of ownership.
- The right research can save you thousands and help you avoid buying the wrong car.
- A test drive and vehicle history check could be the difference between a great deal and a costly mistake.
The decision to buy a car can be an incredibly exciting one. Whether you're buying your first car, upgrading, shopping for new cars in dealerships, or for used cars online, there’s nothing quite like the prospect of snatching up a new set of keys and driving off into the sunset.
7 Steps to buying a new or used car
By following the seven steps below, you can be sure to minimise the stress and maximise the enjoyment of buying a car in Australia.
1. Set your budget
There are two types of car buyers out there: Those that enter the process knowing what they want and those that don’t.
Before comparing models or booking test drives, work out what you can realistically afford.
Whatever your situation, establishing a budget early can help prevent overspending.
A car that stretches your finances may feel rewarding in the short term, but ongoing repayments, fuel costs, maintenance and insurance can quickly dampen the excitement.
Don't forget to factor in:
- Registration and stamp duty
- Insurance premiums
- Fuel or charging costs
- Servicing and maintenance
- Loan repayments and interest
2. Research the right car for your needs
No matter your situation, there’s probably a car out there that would suit it perfectly. The trick will likely be identifying that car.
“Having a clear picture of the lineup, the engine, and the features you need, rather than want, reduces the chance of being persuaded at the dealership,” OnlineAuto.com.au automotive expert Alexi Falson said.
If you have a number of young children, for instance, you’ll want to be able to transport all of them safely. If you regularly holiday in a caravan, you’ll need a car with decent towing capacity.
Compromising on anything you need in a vehicle might be more than simply inconvenient, it could be dangerous.
You also need to consider how much it would cost to upkeep a particular car over another.
It’s also worth considering whether you want to buy a new car or a used one. And, if you’re keen on a used vehicle, whether to buy through a dealership or on the private market.
“The obvious benefit of buying a brand new vehicle is peace of mind,” Mr Falson said.
New cars are presumably without fault and boast a manufacturer’s warranty that can last years. But even then research is needed.
“The best advice for someone looking to buy a new car is to invest the time researching individual variants within a wider model lineup and to keep an eye open for run-out deals on a previous year's model,” he continued.
“Often, a vehicle’s yearly update isn’t as substantial as a manufacturer would have you believe, and you can bet the latest model will have a price premium attached.
“I also encourage buyers not to be tempted into stepping too high up into a vehicle’s trim levels and instead write a shortlist of must-have features to find a more affordable variant that ticks these boxes without paying for a bunch of extras you might not need.”
However, when you buy a new car, your asset will begin to depreciate almost instantaneously. Hence, the expert notes it's typically far cheaper to buy a used car as the largest chunk of depreciation hits within the first three years.
So, if you’re in search of a bargain, you might want to check out the used car market, which exists both in dealerships and on the private market.
While dealerships are convenient and the cars sold by them often come with some form of warranty, Mr Falson warns that it can be time consuming to assess all your options when shopping in person.
“Another disadvantage is that your excitement to buy, combined with a motivated salesperson can lead to some less than logical decision making,” he said.
On the other hand, the private market generally exists online, meaning you can browse from anywhere. But it comes with its own notable downside.
“In terms of private sales, it’s important to remember that a seller isn’t bound by the same laws that a dealership is when it comes to the condition of the vehicle and doesn’t have a reputation to uphold like a dealer,” Mr Falson said.
Consider a car buying service
If all the talk about shopping for a car and dealing with dealerships or vendors seems like a burden for you, you could consider a car buying service.
Car buying services, such as onlineauto.com.au, typically do all or most of the legwork for you. Once you have a rough idea of the type of car you want and your budget, you can work with an agent at a car buying service who will go to their dealership network and find one for you.
Not only that, you could save a fair bit of money going this way, rather than risk losing the negotiation game at a dealership. Car buying services can source fleet-level pricing from the dealerships, and their fee is baked into the final sale price of the vehicle.
As well as this, car buying services can help find a car loan and insurance, drop the car off for test drives, and arrange delivery to your door.
3. Consider car loan pre-approval
If you’re planning on financing your purchase using a car loan, the third thing you could consider doing is applying for pre-approval.
Pre-approval is essentially an indication that a lender considers you a worthy borrower based on your income, outgoings, and credit history.
While not a guarantee of final approval, it can help establish a realistic budget and reduce the temptation to accept expensive dealership finance.
Be aware that dealer finance offers can sometimes include conditions such as balloon payments, which may increase costs later in the loan term.
| Lender | Car Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Interest Type | Vehicle Type | Maximum Vehicle Age | Ongoing Fee | Upfront Fee | Total Repayment | Early Repayment | Instant Approval | Online Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 7.07% p.a. | $579 | Variable | New | $8 | $400 | $34,749 |
| Promoted | Disclosure | |||||||||
5.95% p.a. | 5.95% p.a. | $579 | Fixed | New | $0 | $0 | $34,757 |
| Promoted | Disclosure | |||||||||
5.95% p.a. | 5.95% p.a. | $579 | Fixed | New, Used | $0 | $0 | $34,757 | Disclosure |
4. Inspect and test drive
Once you've narrowed your shortlist, it's time to inspect potential vehicles in person. A test drive can reveal details that aren't obvious in photographs or spec sheets.
“Be sure to take your time and replicate some of your everyday driving situations,” Mr Falson said.
“These include things like parking and three-point turns, which give you a taste of the vehicle’s visibility, steering weight, throttle response, and simple things like the driving position and ergonomics of the controls.”
It also gives you a chance to consider how well the car runs, note any dents or scratches, and assess any obvious potential issues.
Don’t be scared to test drive multiple cars, or to ask if you can take one or two for a longer test drive. You can ask for things that would make you feel more certain.
Many cars are sold with a roadworthy certificate, meaning it has recently been deemed safe to be driven on the road. Generally, cars can’t be registered with state-based roads and transport departments without having a roadworthy or safety certificate.
However a roadworthy doesn’t tell you if it’s going to be reliable on the longer-term. One way to mitigate that worry is a pre-purchase inspection done by a mechanic.
“A mechanical inspection is an absolute must when purchasing even a slightly used vehicle,” Mr Falson said.
“A qualified mechanic will look closely at common issues and ensure that regular, preventative maintenance steps have been taken; it’s too risky to simply take a seller’s word for it.”
A pre-purchase inspection might cost around $150-$200, and are also offered by motoring clubs such as NRMA, RACQ or RACV, but that money is likely well worth it to avoid buying a lemon.
Another thing to consider when buying a used car is the potential it could have been written-off or stolen in the past, or that it has debt attached to it. To check if that might be the case, you can search for its vehicle identification number (VIN) on the Personal Property Securities Register for $2 – a small price for peace of mind.
Finally, before you set your heart entirely on a particular car, make sure its number plate, construction date, VIN, and engine number all match its registration certificate. If they don’t, consider it a giant red flag.
5. Negotiate the deal
The advertised price is not always the final price. Researching comparable vehicles can strengthen your negotiating position and help identify whether a vehicle is priced fairly.
Negotiation isn't always about reducing the sticker price. Buyers may also negotiate:
- Accessories
- Extended warranties
- Servicing packages
- Trade-in values
- Finance terms
6. Transfer registration and organise insurance
Registration transfer requirements vary between states and territories, so check the relevant transport authority in your jurisdiction.
You may also need to pay stamp duty and transfer fees. Remember that insurance should be arranged before driving away.
Compulsory third-party (CTP) insurance generally covers personal injury liability but does not cover damage to your vehicle or other property.
- Third-party property insurance
- Third-party fire and theft insurance
- Comprehensive car insurance
7. Drive away in your shiny new car
Once the sale is complete and registration and insurance requirements have been met, you're ready to hit the road.
Keep copies of the following documents as these may be important if you decide to sell the vehicle in future:
- The sale contract
- Registration documents
- Loan paperwork
- Service records
- Insurance certificates
What red flags should you avoid when shopping for cars?
When you’re hunting for a ride, it's important to remember that if something is too good to be true, it probably is.
Scammers can be active on car sale sites and many aim to entice wishful buyers by pricing cars well below their market value. Not to mention, dishonest sellers exist everywhere.
“Always be wary of potential ‘catches’ that come with vehicles priced too cheap and never take a vendor’s word on the quality of the vehicle without a mechanical inspection to back up their claims,” Mr Falson said.
It’s also worth keeping a lid on your emotions when searching for a car, the expert notes.
“One of the biggest red flags is something that we all do far too often: We get over-excited and can lead ourselves down the easiest pathway,” he said.
“A rushed decision is often a costly one, whether due to buying a more premium variant than you need or the less-than-competitive finance options you’ll find at the dealership.”
It’s also worth keeping an eye out for hidden fees. While there are some legitimate extra costs that can be involved with purchasing a car, such as stamp duty or registration, others can be sneakily tacked on in order to rid you of your precious money.
Make sure you understand all of the fees you’re paying and don’t be convinced to pay extra.
Image by why kei on Unsplash.
First published in January 2024
