- Introduction to buying your first car
- How to find the right car
- The biggest challenges when buying your first car
- Some advice from the experts
1. Introduction to buying your first car
Well this is it, the time has come. After flipping burgers and filling supermarket shelves for hours on end you’re ready to hand over the only wad of hard earned cash ever in your possession and buy your first car. The process can seem overwhelming at first with so many things to consider from finance through to basic mechanics which is why we’ve designed this comprehensive guide especially to help you with just that: the getting it right part.
SO, how do you get it right?
Here is how it goes:
2. How to find the right car
a. Buying new vs old
There are many facets involved in choosing the right car for you. It’s such an individual thing. There is way more to consider besides whether or not you like the colour, so we have broken down the main areas to help you get the right fit.
New vs Used Cars
The first thing you need to consider before you start shopping is whether or not you want a shiny new car or a less shiny but loved and adored used car. Budget tends to be the thing that clears this up for most people but in case you are cashed up enough for a newy then let’s run through the pros and cons of both.
|Your “new” car will lose value as soon as you drive it off the showroom floor. According to the RACQ new cars can lose up to 40% of their value within the first 3 years through depreciation.
|There is a real opportunity that a used car will represent great value for you – especially if you get a good deal. If you do your research before you buy then you will be able to determine the correct value of your dream car to make sure you don’t over pay.
|A new car will likely be more reliable.
|Depending on the age of the car, a used car is likely to be less reliable. This isn’t always the case but it needs to be considered.
|Servicing should cost less as everything is in great working order although you will have to meet minimum servicing requirements to maintain your warranty, so build that into your budget.
|As the car is aging it’s more likely that you will have additional service costs due to replacement of aging parts.
|New cars come with a 3 to 5 year / 60,000 to 100,000km warranty.
|There is usually no warranty on a used car unless the car is within the warranty period (3-5 years old). Sometimes a dealership or specialist insurers will offer a warranty but it’s often tied to having your services completed there.
|New cars tend to be more fuel efficient.
|If your used car is really old then it will be less fuel efficient. If it’s only a couple of years old however then there may not be a great deal of difference.
|New cars will have the latest and greatest safety features including side air bags.
|Older cars will be lucky to even have air bags but if you get a recent model then the safety features might still be quite strong. Do your research.
|Finance rates on secured loans tend to be lower on new cars because lenders consider these loans to carry less risk than loans on used cars.
|Finance rates on a used car maybe be higher than those on a new car as lenders tend to see these as higher risk.
|Insurance on a higher value car will be higher.
|Your insurance cost will be less because the value of the vehicle will be less. If you are looking for cost savings then this is important.
|Bells & Whistles
|You can make to order to a degree because you can add in the sporty tyres or the sports kit, whatever it is you like. But all of these things cost money. Generally the newer the car the more bells it will have – bluetooth, mobile phone sync to stereo etc.
|A used car does not necessarily mean less bells and whistles. It will depend on the make of the car.
b. Dealer vs Private
So now you have decided to buy a used car, how do you figure out who to buy it from?
Buying from a dealer
Some people claim that buying from a dealer is safer as you can be certain there is no finance owing on your car (which you could go on to be responsible for on purchase). This is true to a degree. Going with the dealer means that you don’t have to do the legwork but you will pay for that privilege. If you are happy enough to make a few phone calls to the relevant bodies in each state (such as REVS.com.au) then you can find out this information for yourself.
Additionally, in most states, when buying through a dealer the car will be covered by a statutory warranty which gives you the peace of mind that certain defects discovered after purchase will be covered without charge within the warranty period.
When buying through a dealer, financing options may be easier to obtain too.
Buying privately can often result in a much better price. A private seller has none of the ongoing costs that a dealership must factor into a price and usually a very high motivation to sell.
Added bonus: if used car salesmen make you crazy then you will be much happier dealing with a private seller.
The main thing you need to know here is this: if you are going to buy privately then NEVER do so without checking the financial status of the vehicle. If it has finance pending then DO NOT offer or hand over money to the owner.
c. Considerations for what to look for when buying your first car
First things first: if you’re under 25 years old and a P plater buying your first car then now is not the time to buy your dream super fast car. The law prohibits provisional license holders from driving the following high performance vehicles:
· Vehicles with a power-to-mass ratios above 130 kilowatts per tonne (based on tare mass), or
· Vehicles with significantly modified engines, or
· Other vehicles that are classified as high performance because they have characteristics like fast acceleration.
You can do a vehicle search on the Centre for Road Safety website if you feel you might like something that falls into this category. There’s no point buying something you can’t drive.
Some other important things to consider are:
Stick to what you can afford. If something you really like is much more expensive and will put
you under a huge amount of financial strain then it probably isn’t worth it. Get the next best
option and save for your favourite next time.
What are your needs?
What do we mean by this? Well there’s no point getting a massive car if the only person you are ever driving around is you. Plus the fuel costs will probably end up being half your take home wage. So if you’re mostly only driving yourself and you don’t have a high income then a smaller more fuel efficient car would suit you best. A mum with 5 children on the other hand would need something substantially larger than you do.
Fuel is so expensive these days! Check online for the car’s fuel economy rating before
purchase. This will save you bucket loads in the long term.
Do you want side airbags, ABS brakes and electronic stability control? Figure out which safety
features are important to you and don’t compromise on them.
The more expensive the car, the higher the insurance. The faster and more powerful the car,
the higher the insurance. If you don’t have a substantial income then you need to take these
things into consideration.
d. How to test drive a car
Whether you’re buying new or used you must ALWAYS test drive a car before purchase. Aside from all the technical reasons you need to do this (which we are about to cover) you want to make sure you are comfortable sitting in the thing. Imagine buying an uncomfortable car which annoyed you every time you drove it anywhere.
So here’s the step-by-step guide to test driving the car:
1. Start the engine from cold – if the car is already warm it can hide an issue with it kicking over.
2. Test the car at a high speed – if there is an 80km road near you then take it for a drive along that. You want to see how it goes when pushed.
3. Test the car on a few different roads – bumpy will show the suspension condition, windy will show the steering control, smooth, slow, fast. You get the picture.
4. Test all the gadgets – it might have all the bells and whistles but do they work? Does the bluetooth for your mobile phone work? How about the radio? windscreen wipers?
5. Does the engine knock or rattle – if so, problem!
6. Do the gears change smoothly and easily – another reason for hitting the 80k road, as then you will need to try 5th gear. Make sure the auto gears work too.
7. Emergency stop – an emergency stop will test the breaks. You want to be going to a place with very few cars and having a go at that.
8. Check the dash for red warning lights – is the oil light on? The engine light? Check the dash to make sure there are no warnings you need to know about.
Important! While test driving is important and you should never skip it, it should also not replace a check by a mechanic. Do that too!
e. Registration and insurance basics
Registration – if you don’t do it they will fine you. Get onto it at your local registration authority ASAP. If you buy from a dealer they can usually arrange rego and CTP.
CTP – CTP is compulsory third party cover and is colloquially referred to as the “green slip” in NSW. You cannot register a car in Australia without it. In all states except NSW, ACT and QLD this will actually be part of your registration cost. This insurance covers injuries to other people that occur as a result of your car. It does not cover your own personal injury.
Third Party or Comprehensive Insurance – once you have your CTP insurance you can then go on to decide if you would like to pay for additional insurance. Essentially, your CTP covers people (but not you and not your or their property – ie damage to the car). If you want damage to their car covered you get Third Party. If you want damage to their car AND your car covered, you get comprehensive. Chat to your insurer for the finer details.
Roadside Assistance – it’s well worth signing up to your state’s version of roadside assistance such as the NRMA. Then if your new “used” car breaks down on the highway somewhere they will come and get you and sort it all out.
f. Finance – how to choose the right loan for you
There will be lots of different people ready to provide you finance if you have the income so how do you figure out the best deal?
Watch out for loan terms and conditions. Sometimes the “lowest” interest rate loans have some high penalties if you miss a payment or pay late or have the loan over a longer term than initially negotiated. Sometimes the lowest interest rate isn’t always the best deal.
Know what you are eligible for: this will require some research and is generally based on income and how old the car is.
Think about the term of the loan. If you choose a 7 year loan to keep the weekly payments down is that really going to suit you in the long term? Do you really want to keep that car for 7 years? The value of the car will always go down and the longer you have it the less likely the resale amount is to cover the remaining loan amount.
Use a car loan calculator to work out exactly what you can afford.
g. Research your price
The best way to find out if you are getting value for that car purchase is to do your research. There are some great tools online. The car price calculator here at Gumtree will help you find ads and prices based on any make and model entered.
h. Most popular cars for p-platers in Australia
Here are the top 12 cars amongst p-platers that you might want to check out:
- Toyota Yaris
- Toyota Camry
- Toyota Corolla
- Hyundai ix35
- Hyundai i30
- Ford Falcon
- Ford Focus
- Honda Accord
- Mazda 3
- Mitsubishi Lancer
- 4WD: Mitsubishi Lancer
- Suzuki Swift
Golden rule: size matters!
Get the model that best suits your needs. No point paying for a truck load of petrol each week when you could have been buying a jerry can’s worth.
4. The biggest challenges when buying a car
“Check the service history of the vehicle. Vehicles usually have a service book that is stamped by a car dealer or mechanic for the certified services. They also must check the Vic roads car registry (or whichever vehicle registry is in their state) to see if the vehicle is under finance or has been in a major accident (statutory ride off) The vehicle finance must be paid by the seller or it becomes the buyers problem. The stat ride off is up to the buyer if they really want a car that has been in a major accident.”
Kon from K Line Mobile Mechanics.
Safety tips when buying a car
When buying or selling, you should always meet in-person to see the item and exchange money. For personal ease and safety take someone with you, if this is not possible, arrange to meet in a public place.
Always inspect the item before agreeing to a sale. Inspect all items carefully to ensure they match the description in the ad, and any issues are known before you finalise the sale.
Always use common sense. If it looks too good to be true it probably is!
“5 Basic mechanical skills to learn about your first car:
1. Find out how to check your oil, top up your windscreen washers and how to check the coolant in your engine.
2. Find out which fuel is recommended for your car and always use the right fuel.
3. Look for the tyre placard on your car as this will give you the right tyre pressures for your car.
4. Practice changing the spare tyre and ensure everything you need in a breakdown situation is in your car.
5. Check your oil and tyre pressures regularly and don’t forget to check the spare.”
Jeremy Stone from Car Servicing and You
The art of negotiation
“Know the car you are purchasing. Once you understand the value of the car based on the KMs travelled, service history and the options equipped, you get a much better feel of the car’s value and hence can better negotiate. It’s important to always subject any negotiation of a car out of warranty to a mechanical inspection, one because it saves you the hassle if the car is a lemon, and two, because if there are minor issues, it will help you negotiate the price down further.”
Alborz Fallah – from Car Advice
5. Advice from the experts
“My Number one tip for getting your P’s is to prepare for the task of being a solo driver. Too many people fail because they only prepare for the day of the test and not for the complex task of being a P plate driver. Spend time training and learning in as many different environments and situations as possible. This will give you the skills and experience to pass the test and become a safe driver for life”.
Stephen O’Sullivan, Managing Director of L Trent Driving School
How to budget for maintenance
“Regular servicing every 6-12 months according to your service book will reduce your overall spend. Be aware of when major services are due, typically every 80,000-100,000kms as this will cost significantly more. Also budget for new tyres every 3-5 years, and a new battery every 3 years.”
Elvio from Blue Toro Mobile Mechanics
“Our #1 Tip is to encourage all customers to negotiate the best interest rate upfront as if they are to make a lump sum payment during the term, fees may be applicable. You will often get a better rate buying the newest car you can.”
Shaun McGowan from Carloans.com.au.
How to choose the right car loan for you
“If you’re looking at car finance, you’ve probably already eyed off the wheels you want and that could mean big differences to the type of loan you choose, e.g. some loans are tailored for new cars. The other important thing to understand is the difference between a secured and unsecured loan whereby a secured loan will offer lower rates because the lender uses the car itself as collateral in case the borrower can’t meet repayments.
Either way, shop around and make sure you understand what you’re up for in terms of application fees which can range from $0 up to $350, plus any monthly fees which can be up to $15. These ongoing costs are what can really change the windscreen rate – so use the comparison rate as a guide as it takes these extras into account. “
Kirsty Lamont, Director, Mozo.com.au
Download and/or print the p platers guide to buying your first car in Australia in PDF.