It’s essential that you think things through when buying a car for the first time. Otherwise you might not get the deal that’s right for you.
Let’s pretend you’re thinking about buying your first car and need to talk to someone about where to start.
One of your older friends has owned a few cars and knows a bit about fixing them, so he might be a good person to talk to.
Hey what’s up?
Well I got my first car from a dealership, which is a business that sells new and used cars, but after that I went with private sales.
It's great you’ve got a car in mind, but I reckon you need to think through a few things before going out and buying it.
You might have chosen a car, but have you really thought about what you can afford and how much a car costs to run and maintain?
You need to choose a model that's right for you and one you can afford. What are you going to use your car for? What is your budget, and have you thought about the ongoing costs of running and maintaining a car?
You might want something that’s pretty safe, not too powerful and that doesn’t cost heaps to run.
What are you going to do next? Select an option.
Sure I can come with you. It’s a good idea to bring someone along with you who knows about cars. But first you need to think through a few things.
It’s handy to have someone with you who knows about cars when you’re ready to buy. But have you really thought about how that car suits your lifestyle and what you can afford?
There’s heaps more to work out. Firstly, how much are you willing to pay for your car and are you being realistic?
There’s lots of ways to buy a car, how do you know which one is right for you and how do you get a good deal?
How are you going to make sure you get the best deal for you?
Sure I can come with you. You can get a warranty through some dealers, so if something goes wrong you can take it back. But I think you need to take a step back and look at what car you really need and what you can afford.
Before jumping in and buying a car, you need to have a really clear idea of what car is right for you and what you can really afford. Can you afford the purchase price and the ongoing running and maintenance costs?
Well there’s plenty you need to think about. First you need to work out what car you want. If you start shopping without a car in mind, you might end up with a car that’s totally unsuitable for you, or something you can’t afford to run and maintain.
It’s essential that you do your research before you buy. Work out your budget and the ongoing costs of owning a car. The more details you know about the car you like, the better.
Prices can be very different. Car yards can be more expensive than private sales, but you can get a warranty so if something goes wrong you can take it back. Auctions can be even cheaper, but you may not be able be able to arrange a test drive or an inspection so it can be risky. Then there are online sales. You really do need to shop around.
Buying a car can be risky. Some places are more risky than others so you really need to know what you’re doing. It’s always a good idea to get an inspection report which will tell you if there is anything wrong with the car.
If you're looking to purchase at an auction or private sale, check that there’s no money owing on the car and that they have ownership papers.
Maybe I can. But only if you do your homework. OK, let me ask you a question. How much does a car cost to run and maintain?
I’ve got an idea. Write down all the things you can think of that you have to pay for when you have a car.
Insurance Can be costly if you get comprehensive, and if you have a car loan it's usually a requirement that you get it. Even third party insurance isn’t cheap.
ExcessYou usually have to pay some money when making an insurance claim.
Getting a roadworthy checkIt's a good idea, especially if the car's not registered.
Registration transfer feeIf buying off someone else.
RegistrationThat’s not cheap either.
Stamp dutyA state government charge in some states, for new cars.
BreakdownsThe cost of roadside assistance, or tow truck fees if you don't have roadside assistance.
Servicing and parts
Alternative transportYou might need to hire a car or use public transport if your car is off the road for a while.
TyresThese are often a separate cost from your servicing.
AccessoriesYou might find you want accessories like floor mats, fog lamps or roof racks.
FuelThis is an ongoing cost and the price of diesel, petrol and gas can change each day.
On average cars cost about $7,000 to run every year and there’s always some expense you weren’t expecting. You have to budget for all costs, not just the purchase price or loan repayments. Write down all the things you think you need to pay for when owning a car, then click here to compare this list with your friend's, by selecting the buttons below. Feedback will be displayed for each in the "Your Friend" section. Then click the button to continue.
Look, it’s a smart move to try and get a good deal. But you get what you pay for. An older car that’s done heaps of kilometres, bought at a private sale could turn out to cost you a lot more than if you’d bought from a dealership or bought a car that’s done fewer kilometres.
Buying a car can be risky. Some places are more risky than others and so you really need to know what you’re doing. It’s always a good idea to get an inspection report before buying a car. This is a report by an independent mechanic to check for any defects with the car. It is a little expensive, but could be worthwhile in the long run. Also if it’s an auction or private sale, check to make sure there’s no money owing on the car and that they have ownership papers.
Now let me ask you a question. Let’s say you’ve shopped around and know what you’re willing to pay for your car and you’ve even done a budget for how much it will cost you to run and maintain.
What then? How are you going to pay for all this?
Car yard finance is usually more expensive than getting a loan from a bank. But these aren't the only two options. Building societies and credit unions also offer loans.
Saving up and buying the car outright will cost you the least. Even saving up most of it and just borrowing a little bit will cost a lot less than borrowing the whole amount. So, slow down and think things through and have your finance plan in place before you buy.
Borrowing money is a serious business. You enter a contract and must pay back the money you borrow plus interest, and you must do this at an agreed repayment amount each month. You must understand how much your repayments are, how long it will take you to repay and importantly, that you can afford the repayments. Don't sign a contract you don't understand. Get help from someone who can explain it to you.
Yeah funny. You still owe me fifty bucks.
Looking at your options is a smart move and buying it with your own money is the cheapest option.
Let’s say you borrow $10,000 and pay it back over five years at 10% interest. After the five years you would have paid nearly $13,000. Meanwhile that ten grand car would have lost value, this is called depreciation. In five years it will be worth a lot less than what you bought it for. Imagine if you had taken out a bank loan and then lost your job leaving you unable to repay your loan. What would you do then?
Not a great move. They could take the car and sell it and most likely get less than what you bought it for. Then you're left to pay what is still owing on the loan. Not only that, but you may receive a bad credit rating. Lenders refer to credit ratings when they decide whether they should lend someone money. A bad credit rating may affect your ability to borrow money for a long time.
When you borrow money, you sign a contract. A contract is a legal agreement between you and the lender. It explains the terms of the loan including the amount you have to repay plus any interest, fees and charges. You may be required to pay extra fees if you pay your loan out early. These are sometimes called early termination fees.
A credit rating is another important thing to think about when using credit. If you receive a bad credit rating it may be really hard to borrow money again for some time. This could affect future plans you might have such as buying a house.
This might be an okay option if you know you're going to run out of money. So let’s say you sell your car because you know you are going to run out of money and cannot afford the repayments on your loan. The car will most likely depreciate, and be worth less than when you bought it, so you may not get enough money from the sale to pay out the loan. Also, the company that lent you the money will probably charge you with fees and other charges. These charges are specified in the contract and can be things like early termination fees. But, at least with this option, your credit rating might still be OK, as long as you pay back all the money you owe.
When you borrow money, you sign a contract. This requires you to repay the loan plus interest. It may also require you to pay extra fees if you pay out your contract early.
That’s right! If things start going wrong talk to your lender. You might be able to work out a temporary repayment arrangement that you can afford, until you get back on your feet. You may still need to sell your car but if you ignore the problem your car may be repossessed, you may be hit with extra charges and your credit rating may be affected.
If you receive a bad credit rating you may find it really hard to borrow money for some time. This could affect future plans you might have such as buying a house.