Buying a car in Australia: 9 steps
There are a number of factors to consider when buying a car.
To help you make the right choice based on your personal circumstances, here are nine general steps to follow.
1. Ask yourself why you need a car
Are you looking for a small hatchback to get you from A to B? Or do you want an SUV for longer journeys where comfort may be an important factor? Knowing what you need a car for might help you narrow down your choices.
Some other questions to consider asking before you start your hunt include:
- Is the car just for you, or for your family?
- Do you need a vehicle with plenty of storage space?
- How important is fuel economy (how much fuel the car uses as you drive) to you?
2. Weigh up whether to buy petrol, diesel or electric (including hybrids)
Electric cars (or EVs) can be more expensive to buy than petrol, diesel, or hybrid cars, but can be cheaper to run over time. That’s because fuel is generally a lot more expensive than electricity . Several electricity retailers may also offer EV-specific electricity plans, which designate free electricity periods for recharging your EV. In addition, the cost of EVs is dropping as supply and demand grow.
Bear in mind that electric car charging stations and infrastructure are more common in inner-city locations. If you live outside a central location (or drive frequently outside of the city), you may find less charging points available. Alternatively, you could buy a portable EV battery pack, but they can be expensive.
Hybrid cars can be powered by a battery or a combustion engine, depending on driving conditions. The battery is charged when driving, so you don’t need to wait at any charging station. But here’s the catch: batteries wear out over time and need replacing, which could cost you thousands.
If you want to buy a greener car with lower CO2 emissions, you’ll need to research which option best suits your own needs and finances, such as by using the Australian Government’s Green Vehicle Guide. There may also be special ‘Green Car’ loans or government rebates available when purchasing electric/hybrid cars.
3. Decide how much you can afford to spend
Purchasing a car
Be it a new or used car, it’s important to gauge how much you can comfortably afford. If you have a car to trade in, you may have more flexibility to pick a pricier car or one with more features.
Private sales typically earn more than trading in your car at a dealership, but the latter is a more convenient option. You can check the potential value of a trade-in or private sale of your own car on RedBook or similar websites. These sites are also handy for comparing the advertised price for used cars against other listings. Having enough cash upfront could give you better negotiating power.
If you’re thinking of taking out a car or personal loan to finance the purchase (partially or in full), you may want to speak to a lender first. You can also compare car loans offered on Canstar’s database. The downside to a loan is that interest is charged throughout its length. If you have a low credit score, you may be penalised with higher rates or have your application rejected. It is important to check your credit score before taking out any loan, and consider improving it first to secure approval and a lower interest rate.
Once you’ve found a car loan, it’s worth considering applying for pre-approval to know exactly how much you can spend when negotiating a deal. Remember: there’ll be other fees you have to pay, such as stamp duty, registration and CTP insurance. There may also be delivery costs if you buy a car from a dealer or interstate.
Ongoing costs of owning a car
Knowing how much you can afford is the first half of the battle; the other is the ongoing costs of owning a car.
These include:
- Car insurance
- Registration and licensing (may include CTP, depending on the state)
- Fuel
- Servicing and maintenance
- Car loan payments (if any)
- Roadside assistance
- Tolls.
However, this list isn’t definitive. It also leaves out the following costs:
- The excess you pay to make a claim on your insurance
- Parking fees
- Depreciation, which is the loss of your car’s value over time
- Possible fines incurred.
Remember: these numbers are not universal. There are effective ways to manage your ongoing costs, like:
- Downgrading your optional car insurance cover
- Opting for a higher excess to lower your insurance premiums (provided you’re willing to pay a higher excess if an accident occurs)
- Filling up at cheaper petrol stations
- Driving less
- Avoiding expensive parking
- Avoiding toll roads.
4. Do your research
Once you know the type of car you’re after and what you can afford, research vehicles from different car manufacturers to help with your decision. It’s often a good idea to read plenty of reviews and comments online to see what people are saying about particular cars. If you’re in the market for a new car, websites like Drive and WhichCar may provide insight and reviews on newer models.
As part of your own research, you can check the car specs and compare them between models. Details should be available on a manufacturer’s website, or you can request a brochure from a dealer.
It’s also important to check if a car is safe, and if there have been any product recalls issued by Product Safety Australia (such as for faulty Takata airbags). You can check a car’s safety rating from the Australasian New Car Assessment Program (ANCAP) or use the website howsafeisyourcar.com.au.
5. Take a car for a test drive
Whether you’re buying from a dealer or a private seller, you should be able to test drive the car. When sitting behind the wheel, it’s worth checking a few basic things:
- Drive the car on a range of roads at different speeds.
- Check all passenger and rear seats, making sure they have enough room.
- Check if the vehicle is comfortable.
- How easy is it to see the dashboard display and locate the buttons and levers?
- How’s the visibility? Can you see clearly through the front and rear windows, and check the side mirrors?
- How does the music system look and work, plus any in-car navigation or other gadgets?
- Do you have enough cup holders?
Test drive several different models if you can, noting any likes and dislikes. Sometimes your personal preferences about the car’s look and feel may matter to you just as much as what’s under the bonnet.
6. Decide between a new or used car
Inevitably, both new and used cars are depreciating assets. For new cars, depreciation typically is steepest in the first year of purchase.
If you’re buying a brand-new luxury car, you may also be liable for a luxury car tax (LCT) if you surpass the LCT threshold, which can be a significant amount.
If you don’t mind a used car, check if any dealers are selling any demonstration models. You could save a considerable amount of money compared to a brand-new unit.
Buying a new or used car from a licensed dealer means you’ll typically be entitled to some form of warranty, which you may not receive if you buy from a private seller.
If it’s a private sale and you know nothing about cars, then consider asking someone who does to come along with you. Also consider hiring a qualified mechanic for a pre-purchase inspection.
When buying used cars, it’s also important to check:
- The car’s history
- Its service logbook
- Whether it’s had any repairs or replaced parts
- If the odometer reading matches what’s advertised
- For fluid leaks, which could be a sign of poor maintenance
- For mismatched paintwork, which could be from a major repair done after a crash
- If the car has been modified at all. Car modifications can affect your car insurance premiums and may also impact the potential resale value.
Buying at auction may let you get a good deal, but you have limited options if something goes wrong. The Australian Competition and Consumer Commission (ACCC) has a handy guide on your rights in consumer law.
7. Make sure the vehicle is legal
If you’re buying a car privately, it’s your responsibility to check if the car:
- Is legal
- Hasn’t been stolen
- Hasn’t been written off
- Is not subject to outstanding debt.
For $2, you can do a used vehicle search in the Australian Government’s Personal Property Securities Register (PPSR), with some motoring organisations offering a similar service.
To do this, you’ll need the vehicle’s VIN or chassis number, which can typically be found:
- Under the car’s bonnet
- In the car’s registration documents
- On a label located on:
- The driver’s door frame
- Bottom of the windscreen on the passenger’s side
The Royal Automobile Club of Queensland (RACQ) warns that police can seize a stolen vehicle without compensating you.
If there’s outstanding debt owed on the car, you may find yourself in a complex situation. If the car needs a safety certificate (the rules vary between states and territories), check if it’s still valid.
8. Negotiate the price
Don’t be afraid to make a lower offer, though you may have less negotiating power on more popular cars, especially if there is a waiting list.
You can also ask if a dealer is willing to offer optional extras for free or at a discount, such as:
- Carpet upgrades
- Leather seat upgrades
- Extra tech features
- Tow bar.
If you took out a personal loan to buy a car, remember that the cost of any extra features you paid for could be added to it.
Be mentally prepared to walk away if the price is not what you can afford and compare offers from different dealers and sellers.
But if you’re not confident with negotiating, you could consult a car broker to do all the negotiating for you. There are plenty of brokers around, but check for any fees or charges and whether they can help with the trade-in or sale of your existing car (if you have one).
9. Get the paperwork
As you’re about to finalise the deal, make sure you get all the relevant paperwork, including:
- Contract
- Warranty details
- Car manual
- Safety certificate
- Registration documents.
Make sure all paperwork details match the car you’re buying. Don’t sign anything unless you’ve read and are happy with the terms outlined in the contract.
You do have some protection if the car turns out to be a lemon, with faults or defects. But it’s better to do as many checks as possible before signing the deal.
If you’re buying from a dealer, you may be entitled to a short cooling-off period, where you can withdraw from a contract without penalty. However, if you’re buying online, exercise caution to avoid being scammed. Regardless of the seller, be it a dealer or private sale, never buy a car without having seen it or having it independently tested.
Finally, make sure the car you buy is registered and covered by adequate insurance before driving it away.
