How much should you spend?
Costs to expect
New or used?
Borrowing
Heritage's 3 steps to buying a car
At Heritage, we put People first, but we know a lot of people love them so much they put their car first! This guide to buying a car is a huge help, particularly if it's your first time.
How much should you spend?
Obviously you need to stick to your budget. It's easy to get carried away and talk yourself (or get talked into!) buying something you can't really afford.
Remember, buying the car is just the start of the expenses. So keep some money aside to register it, insure and maintain it. These are significant ongoing costs.
Buying a car is a real balancing act. If you spend a little more, you may get a car that's more fuel efficient, will require less maintenance or will simply last longer. Is it worth it? Do your sums and see what you think.
Don't rush into any deal until you've thought about the pros and cons. Walk away and have a coffee before you make a decision. Don't make a decision based on emotion. There are plenty of cars out there.
Costs to expect
The purchase price of the car is obviously the largest up-front cost. But there are lots of other expenses you'll need to budget for. They include:
Stamp duty
State and Territory governments levy stamp duty on both new and used cars. While the amount and the way it is calculated vary, it is usually calculated as a percentage of the purchase price or the market value. For a new car, the stamp duty amount should be included in the ‘drive away' quote you receive from the dealer.
Registration fees
All cars in Australia must be registered. If you buy a new car, the dealer will organise for the car to be registered and include the registration fee in the ‘drive away' price. If you are buying a car privately, check that the registration is still current. Beware of buying an unregistered car because there are extra safety checks and costs involved in getting it re-registered.
Transfer fees
If you buy a used car you will need to transfer the registration from the previous owner to your name. There is a fee involved for the transfer, and some States and Territories may also charge a late fee if you do not complete the transfer within a specified period of time.
Insurance
At the very least you need Compulsory Third Party (CTP) Insurance to get your car registered. This insurance provides cover against claims of compensation if you injure or kill someone in a car accident. CTP doesn't cover you for damage you do to another person's property, including other cars.
In most States and Territories, CTP insurance is automatically included with your registration and provided by only one insurer. However, in New South Wales and Queensland, there are a number of companies who offer this type of insurance. Shop around. You can save a few dollars.
If you borrow money to pay for your car, then your lender will usually require you to comprehensively insure it and have the lender listed on the policy. Comprehensive cover is also sensible to protect your asset. Heritage can organise your motor vehicle insurance for you.
Once you have decided why you are buying a car and what you can afford, the next step is to start thinking about finding the right car for your needs.
New or used?
Driving a brand new car off the showroom floor is exciting.
There are some advantages to buying a new car:
- New cars come with a warranty, usually from 3-5 years, so you're covered if something goes wrong
- Most new cars are more fuel efficient, better performing and safer than they were a few years ago
The major disadvantage of buying a new car is that it depreciates significantly in value over the first few years. In fact the moment you drive it away it loses a lot of its value simply because it's not new anymore. This isn't usually a problem if you don't plan to sell it soon. But if you do sell it within a few years, it may drop 30% or more from what you paid.
Advantages of buying a used car include:
- You can save thousands of dollars when you buy a near new, used car
- If you buy a used car from a dealer and the car is no longer covered by the manufacturer's warranty, the dealer still must offer you one. The length varies between the States and Territories, but it's typically 3-6 months
- The manufacturer's original warranty still applies (provided that the car is within the warranty timeframe) when you buy a used car so the remaining time on the warranty is still valid
The big disadvantage to buying a used car is that you may buy someone else's "lemon". It's absolutely vital to have it checked thoroughly by an independent mechanic or your State's motoring body.
Borrowing
Once you've found a great car, and you know the total cost, you may not have the cash or savings to pay for it. One of the best ways to achieve your goal is to get a personal loan, a new car loan or a used car loan.
It's a good idea to have your loan approved before you go looking for a car. That way you know exactly how much you have to spend and you're in a position to snap up a bargain or negotiate a good deal if a great car is on offer.
Heritage's 3 steps to buying a car
Buying a car is a big decision. Follow these 3 steps and you should be behind the wheel of your new car in no time.
Step 1: Test drive and essential checks
You may have your heart set on a particular model, but if you don't feel comfortable driving it, then maybe it's not the right one for you.
New cars
You will be driving a demonstration (or "demo") model. Make sure that the demo model has the same features as the model you are going to buy.
Used cars
A test drive is even more important because you also need to be 100% sure the car is mechanically sound. It's a good idea to ask the existing owner why they're selling the car and whether it's been in an accident.
Inspect the car carefully
- How many kilometres has it done? 20,000 a year is about average. Do some research on the make and model and find out how old it is
- Check the tyres. New tyres are a major expense
- Check the body for dents and rust
- Check that the logbook shows regular and proper servicing. Be very wary of a car without a logbook
General test driving tips:
- Don't just drive around the block. Make sure you spend at least 15 minutes in different conditions. Drive it at 100 km/h on a highway if possible
- Try parking the car. If it's difficult to park in tight spots or doesn't have good visibility, it may turn out to be a constant problem
- Find out about all the car details and get a quote to insure the car
There are some important checks and inspections that should be carried out on any used car you are seriously considering.
Mechanical inspection
Unless you are a qualified mechanic or highly competent mechanically, it's absolutely essential to organise an inspection through your State or Territory motoring association. These reports are worth every cent. You will receive a thorough report on the vehicle.
Some car dealers or auction houses may have already had a report completed on the car, and you just need to check that it is recent.
Step 2: The negotiations
You've found the right car, now it's time to start negotiating. While the seller may state a price, it's perfectly OK to make a lower offer. The seller is often willing to accept a lower price. Here are some tips to keep in mind when negotiating:
- Don't be pressured into anything you're not comfortable with
- It's best to be friendly but firm. Be positive and honest
- Be upfront about the price. If it's out of your price range or you think it's too expensive compared to similar models you've seen, say so. The seller may drop their asking price when provided with these reasons
- Use the inspection report to negotiate a discount. If the report shows that you'll need to pay for certain repairs, you should be able to negotiate a lower price
- Leave your name and phone number. It shows you are genuinely interested and gives the seller the chance to phone you later if they change their mind about accepting a lower price
Doing the deal
Once you've negotiated a price, if you buy from a dealer you'll be asked to sign a contract or order form. This is a legally binding document, so make sure you read and understand it fully before you sign.
Make sure the contract is completed before you sign it and that all the costs (including stamp duty, dealer charges, optional extras, etc.) are clearly stated. Insist on a definite delivery date if ordering a new car as sometimes it can take months for a new car to arrive.
Leaving a deposit
Whether you're buying privately or from a dealer, you will have to leave a deposit when you've agreed to buy the car. Be cautious when handing over money and leave the minimum amount required, which should be no more than 10%. Don't leave without a signed and dated receipt that outlines the agreement you've reached with the seller.
Ideally, all the checks and inspections (for a used car) will be completed before you leave a deposit. If it's not possible to organise these checks in time and you want to secure the car, ensure that the deposit is refundable if the inspections are not satisfactory.
Step 3: Taking her home!
When your car is ready and you've paid the full amount, you can take delivery. Before you drive away you should inspect the car thoroughly. If possible, you should do this during daylight hours in fine weather.
- Have your insurance organised before you drive the car
- Check that the seller gives you all keys, owner's manual, logbook and other ‘must haves'
- Double check for any defects in the paint and trim and ensure that all the windows, lights, locks and other mechanisms are working properly
For used cars:
- Notify the transport authority in your State or Territory that you are the new owner of the car. You will need to complete the transfer papers