Whether you’re schmoozing a salesperson on the showroom floor, or haggling a private seller for an old runabout, buying a car is an exciting time.
But it can also be a financial minefield, and if you’re not careful it’s easy to end up hundreds – or even thousands – of dollars out of pocket. No one wants to spend the next 10 years paying off their ‘new’ car. Believe me, it won’t feel new for long.
Here are my steps for buying a car that gets you out on the road with enough left over to keep the tank filled.
1. Understand your needs
The first step to buying a car is to work out what you need from your car and set a firm budget.
Remember to include all on road costs in that budget. To help you out, most state motoring organisations have done the research on the real running costs of different makes and models. Head to the organisation in your state’s website and plug their figures into your budget – NRMA in NSW and ACT; RACQ in QLD; RACV in VIC; RAA in SA; RAC in WA; RACT in TAS.
Then, start to research different makes and models until you have a good feel for how much vehicles you’re interested in cost. Include features to look for and good models or years to buy.
Hot tip: If you’re buying second hand, aim for the newest car with the lowest km possible for your budget. That way you’ll hopefully save on servicing down the track.
2. Be prepared
Before inspecting a vehicle, put together a list of questions to ask the seller.
Buying new? Make sure you ask about fuel economy, fixed price servicing and dealer warranties.
Buying second hand? Always check the car’s service log, ownership history and whether it’s been in a crash. Also, ask why the current owner is selling the car, registration details and whether they actually own the car or are selling on behalf of someone else.
Hot tip: Don’t just take the seller’s word for it. Check the car’s registration details with your state transport authority. Cross check the engine number against the car’s paperwork, and ask for a recent roadworthy certificate.
3. Be a smart buyer
If you’re buying a car from a dealer (new or second hand), time your purchase. Delaying to the end of the month, end of financial year or end of calendar year can lead to serious savings.
Salespeople are more likely to discount at these times. That’s because they need to hit their targets or clear old stock to make way for new models or earn their monthly bonus.
And no matter who you’re buying from, never be afraid to negotiate. The headline price is for mugs. Make a reasonable offer, keep emotion out of it and walk away if you’re not getting what you want.
Hot tip: Watch out for added extras such as leather trimmings… a few hundred bucks may not seem like much in the context of buying a car, but extras quickly adds up.
4. Get the best loan
If you’re relying on finance to buy your car, it can be tempting to simply go with whatever the dealer is offering.
But before you sign on the dotted line it pays to understand what’s out there; other lenders may be offering a better deal.
Hot tip: Look for loans with low interest rates and shorter terms. Even if the monthly repayment seems higher, you’ll ultimately save on interest.
5. Sort your insurance
The final piece of the puzzle is insurance.
At a bare minimum you’ll need Compulsory Third Party (CTP), and thirty party cover to protect you against damage you cause to other people or other people’s property. If your car is new or valuable, you’ll likely also need comprehensive cover to protect you against damage to your vehicle.
The cost of cover will come down to a number of factors like your age, driving experience, the make and model of your car, where you park it and how you use it.
Shop around for the best insurance deal relative to your needs. It can save you thousands.
Hot tip: To keep your premiums down, it’s best to have good security features on the car and park it securely at night. Maintaining a good driving record won’t go astray either.
As you can see, a lot more effort goes into being sensible when you’re buying a car. But when you check your bank balance the next day, you’ll be glad you took the trouble.