There's a lot to think about when buying a car.
What type of car do you want, how much can you afford to pay for it, where are you going to get the money and how much will it cost to run?
While you might bargain over the price of a car, you can also save by shopping around for the best car loan for you. You should also get insurance in case you have an accident or the car is stolen.
Make sure that you shop around and do your homework - for your car, your loan and for insurance.
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The bottom line
- Getting the best deal on your finance is just as important as getting the best price for the car.
- It pays to shop around for a personal loan and for insurance.
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Working out what you can afford
When you're buying a car, you need to consider more than the retail price. Extra costs include stamp duty, registration, the transfer fee and insurance.
You will also need to consider running and maintenance costs of your car. For example, how much does it cost to fill the tank with petrol? Are replacement parts expensive? These costs will vary from car to car, so factor them into your budget.
You may also decide to join a motoring organisation which can help you out in many ways, such as when your battery goes flat.
Where to buy a car
If you're looking to buy a second-hand car, you can buy one from a dealer, through a private sale, online or at an auction. Each option has advantages and disadvantages.
For example, by buying a car privately or at auction, you might get a good deal, but you'll need to check that the seller is free to sell it. There may be problems with the sale if the car is being used as security for a loan. In extreme circumstances, you may find that it has been stolen. There is a register in each state and territory where you can check ownership and whether a car is being used as security (the Register of Encumbered Vehicles or Vehicle Securities Register). See More information.
Unless you have good knowledge of cars, it can also pay to have the car inspected by a mechanic or motoring organisation so that you are aware of any problems.
If you buy a car from a licensed motor dealer, you will receive guarantee of title, a warranty and legal protection.
Borrowing the money
If you don't have the cash up-front to buy a car you might decide to borrow the money.
Personal loans are offered by banks, building societies, credit unions, specialist lending companies and leasing companies.
Car dealerships also offer loans and they may offer to arrange your finance. You don't have to get finance through the dealer and it's often cheaper to get a loan from somewhere else.
While dealer finance may be more convenient because you can sign up and drive away, you might end up paying more than you need to, or face restrictive terms and conditions on the loan you've signed up for.
It pays to shop around and see what personal loans are on offer. Even paying an extra 0.5% interest can really add up over the life of the loan. See Understanding credit.
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Make it happen
- Don't rush in and take the first loan you are offered.
- Do your finance shopping before you go to the car yard.
- Shop around for the best deal by comparing interest rates, fees and penalty charges.
- Make sure that you only borrow as much as you need. Pay as much as you can up-front, in cash or as a trade-in.
- The longer the life of a loan, the more you pay.
- Check the fine print of fixed-price service contracts to see what is covered, before accepting them.
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Paying for a car
When you buy your car, pay with a bank cheque (if possible) so you don't have to carry a large amount of cash. Make sure that you get a receipt from the seller.
If you have bought a car from a dealer, make sure you understand the conditions of the warranty. You can find out more about where you stand with warranties from the consumer affairs department in your state or territory. See More information.
If you are in business, you may consider paying for a car through leasing or hire-purchase. Talk to your accountant or business adviser before entering into a lease or hire-purchase agreement.
Insurance
If you own a car you must have personal injury insurance.
In most states and territories, this covers people who are injured through the fault of the driver of your vehicle. In some states and territories, the insurer will cover all people injured in the vehicle, including the driver. See More information.
In addition to compulsory personal injury insurance, there are three common types of optional car insurance policies that cover damage to property:
- Comprehensive insurance - covers damage to your own car and damage to other people's property (usually their car) in an accident.
- Third party fire and theft insurance - covers damage caused by your car to other people's property, and limited cover for loss or damage to your car caused by theft or fire only.
- Third party property insurance - only covers damage caused by your car to other people's property. It does not cover the cost of repairs to your own car.
You may also be offered:
- Consumer credit insurance - covers you if you are no longer able to meet your repayment obligations, for example, due to unemployment, illness, disability or death.
- Gap insurance - covers you in the event of total loss of your vehicle if there is a 'gap' or shortfall between the outstanding debt owing on your loan and the amount you recover under your standard insurance policy. It may also cover you for expenses related to the purchase of a replacement vehicle.
Some insurance companies may offer these 'add-on' policies as a matter of course. It pays to think carefully whether you want this level of cover before you buy them.
Some finance companies sell car insurance when they offer personal loans. It pays to shop around because you may be able to get a better deal from another insurer. The law allows for a cooling-off period after buying insurance. You can change your mind under certain conditions. For more information about insurance and how to find the best product for you, see Insurance.
Traffic fines
It pays to deal with any fine you may get for a parking or traffic infringement. Either pay the fine or, if you believe you are not liable, contact the issuing authority.
If you do nothing about a fine, your car registration could be cancelled or your licence could be suspended. You could also have to pay additional fines or fees. More serious penalties could also be invoked.
Don't ignore fines.
More information
There's a lot more that you can find out about buying a car. See More information.