How to: Buy a car


Apart from your home, a car may be one of the most expensive purchases you make, so it’s imperative you get it right. Along with brand, size, colour, mileage, price and safety, there are many elements that come into play when you’re making a choice on what car to buy. We give you some tips and tricks on how to go about purchasing a car, and some of the ways you can be frugal and money-smart in the process:

Work out the costs

Different cars cost varying rates to run and keep on the road, so writing up a hypothetical budget sheet can allow you to visualise whether you can actually maintain this new expense. Consider the cost of the registration, allocated insurance, stamp duty, regular mechanic services, petrol and the occasional car wash. The average Australian household with two vehicles pays between $14,000 and $22,000 a year in transportation costs. These costs can differ due to varying factors such as geographical location.

Don’t forget you also need an emergency fund in case of unforeseen problems, such as the car breaking down, needing a tow or requiring a replacement part. This is why belonging to an onroad service is a good idea, particularly if you buy an older vehicle.

Decide the method of purchase

  1. Dealership

Dealerships offer both new cars and used cars available for purchase that can be financed or purchased outright. If you’re looking to buy a brand new car, walking into a car lot is ideal for checking out a vast array of options in one place. You also have the ability to ask the car salesperson questions as well as test drive the vehicle.

The same applies to used, pre-owned cars, with the additional advantage of affordability. You may also feel more confident purchasing from a car lot than a private seller as salespersons are available to offer advice to assist your choice.

If you’re upgrading your vehicle with this new purchase, dealerships can offer an exchange where you trade in your old car, saving you the effort of then selling your car privately. However, make sure to check the value of your pre-loved vehicle as dealerships are aware that you are likely to be looking for a quick sell and may not offer you the most competitive price.

  1. Private sale

Unlike a used car dealership, buying a second-hand car from a private seller who’s advertised it on Gumtree or Facebook Marketplace means you have no Guarantee or Warranty attached to it if something goes wrong with the vehicle. In most cases you’ll be able to find a cheaper deal, removing the cost that the dealership may have added for advertising and salesperson commission. It’s a good idea to search around and get a few quotes to work out if the cost savings are worth forgoing the Warranty and Fair Trading protection.

If you decide to go down this route:

  1. Make sure to check the vehicle is correctly registered in your state and when that registration requires renewal.
  2. Purchase a vehicle history report to find out whether the car has ever been reported stolen, been written off, its past use and it’s original date of registration.
  3. Have a mechanic run their eyes over the vehicle to check the price is justified, there are no faults that have been concealed and the general functionality of the vehicle. The last thing you want to do is purchase a car with issues that constantly requires repair, replacement and your hard-earned dollars.
  4. Double check what’s been advertised is correct by looking at the listed features and checking ordinary functionality such as headlights, indicators, windscreen wipers and whether the windows go down.

3. Auction

When going to a car auction, one way to ensure you’re remaining in budget is to go with a figure in mind of how much you’d like to spend and don’t budge from that decision. Do your homework beforehand on what the kind of car you’d like to buy is worth and find out what these models are going for via private sellers and dealerships. As with other second-hand purchases, you’ll want to assess the maintenance of the car and whether it has been regularly serviced and pay attention to the condition report. The disadvantage of buying at auction is that you cannot test drive the car, however you can in the days leading up to the auction you can test drive that particular model and pay attention to the seat comfortability and engine power.

One bargain you may find at auction is ex-government vehicles that come with a lower mileage than other second-hand vehicles. They’re also more likely to have been serviced regularly with updated documents.

  1. Novated lease

A novated lease allows you to make repayments on a new or used car from your pre-tax salary with under a ‘salary sacrifice’ arrangement, allowing you to reduce your taxable income in the process. Assessing your income, the cost of the car and the ongoing running costs will help you to decide how cost-effective a novated lease may be for you.

Your employer will make repayments to your finance provider on your behalf and when/if you change jobs, you will continue to make these repayments directly or you can transfer the agreement to your new employer. Having a novated lease means you’re allowed to use your car for personal use, rather than being restricted to work or business purposes.

One point to keep in mind is that the Federal Government considers a car under a novated lease with an employer to be a fringe benefit, which mean fringe benefits tax may then apply. If this is the case, it’s best to check with an accountant or your employer about this.




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