Car Buying Guide: How to Buy a Car

Information verified correct on December 8th, 2016

When life gives you lemons - make sure it's not the next car you buy

Buying a car is no easy task, especially if you’re buying your first car, and even if you’re buying a second or third car, it should go without saying that certain aspects still require your attention. From the kind of car you buy and how you pay for it to how much you’ll end up spending in the long term, various factors when left unaddressed can lead to avoidable duress.

IMB New Car Loan

IMB New Car Loan

Apply for IMB New Car Loan and enjoy a great low fixed interest rate with no ongoing fees.

  • Interest Rate From: 6.34% p.a.
  • Comparison Rate: 6.62% p.a.
  • Interest Rate Type: Fixed
  • Application Fee: $199
  • Minimum Loan Term: 1 year
  • Maximum Loan Term: 7 year
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: $75,000

Comparison of car loans you can apply for

Rates last updated December 8th, 2016
$
Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Repayment
CUA Fixed Rate Car Loan
A competitive car loan that offers flexible repayment options and no account keeping fees.
From 6.79% (fixed) 6.92% $15,000 1 to 7 years $0 Go to site More
IMB New Car Loan
This fixed rate new car loans up to 2 years old features no early repayment penalties
From 6.34% (fixed) 6.62% $2,000 1 to 7 years $199 Go to site More
RACV Car Loans
Enjoy this fixed rate new car loan offer from RACV. No ongoing fees.
From 6.2% (fixed) 6.73% $15,000 1 to 7 years $378 Go to site More
NRMA Car Loan
Purchase a new car with an NRMA Car Loan with a fixed rate term and no monthly fees.
From 6.2% (fixed) 6.73% $15,000 1 to 7 years $378 Go to site More
RACQ New Car Loan
Apply online and receive a response within 5 business hours.
From 6.2% (fixed) 6.73% $15,000 1 to 7 years $378 Go to site More
Latitude Personal Loan (Secured)
Can be used for whatever purpose: renovating, buying a car, booking a holiday. Funds can be in your account in as little as 24 hours.
From 12.99% (fixed) 14.2% $3,000 2 to 7 years $250 (Loans under $4000 - $140) Go to site More
Matchacar Financing
Get a tailored financing solution for buying your next car.
From 5.35% (fixed) 6.04% 1 to 7 years $350 Go to site More
IMB Secured Personal Loan
A secured loan from IMB with flexible repayment features
From 7.39% (fixed) 7.67% $2,000 1 to 5 years $199 Go to site More
St.George Secured Personal Loan - Fixed Rate
Get behind the wheel of your perfect car with a competitive interest rate from St.George. Get an application response within 60 seconds.
From 8.49% (fixed) 9.39% $3,000 1 to 5 years $195 Go to site More
Bank of Melbourne Secured Car Loan
A low rate personal loan from Bank of Melbourne with variable or fixed option.
From 8.49% (fixed) 9.39% $3,000 1 to 5 years $195 Go to site More
BankSA Fixed Rate Car Loan
Apply for a fixed rate car loan from multi-award winning BankSA.
From 8.49% (fixed) 9.39% $3,000 1 to 5 years $195 Go to site More

Finding your perfect car

There is no easy answer to this, simply because not everyone wants the same kind of car. For starters, you have to choose between light, small, medium, large, sports, hybrid, and luxury cars, and the size you require depends on your specific needs. For instance, if you’re looking for a car to drive through busy inner-city traffic, a light car like the Suzuki Alto, Honda Jazz, Fiat 500, or Alfa Romeo MiTo would be considerably easier to manoeuvre when compared to bigger models. On the other hand, if you’re considering towing a boat or a caravan using your car, buying a large model would be ideal.

Shapes also vary from model to model, and your basic options include hatchbacks, coupes, sedans, and station wagons. If you’re thinking about making a style statement, you can consider getting a convertible or a coupe. If you need extra storage space, a station wagon offers plenty without compromising on fuel economy, as is the case with SUVs.

Once you decide on size and style, establish a budget and decide if you want to buy a new or used car. In either case, ask yourself certain questions, like below:

New car

  • What are the car’s standard fittings?
  • How long does the warranty stay in place?
  • Is there room for price negotiation?
  • Can you trade-in your existing car?

Used car

  • Why is the car for sale?
  • How many owners has it seen?
  • Does it come with complete service history?
  • How many kilometres has it covered?
  • Has it been in an accident?
  • Can you inspect it without any objections from the seller?
  • Is there a loan attached to it?
  • Is there room for price negotiation?

Getting a loan for a used car

How to pay for your car

After deciding on the car you wish to buy, you have to find out just how much you’ll have to pay and while you can save to buy a car you can also get a loan or go the dealer finance way.

  • Save, save, save

If you plan to save to buy a car it might take time, but you won’t end up paying any interest. You can start by opening a savings account and continue adding funds to it until you save the desired amount.

  • Take out a loan

When it comes to borrowing money in order to buy a car you’ve got multiple options. If you’re buying a new car or one that’s up to three years old, you can generally use it as security and take out a secured car loan. You can also buy older used cars by getting unsecured car loans as well as unsecured personal loans, but these tend to charge higher interest rates when compared to their secured counterparts. Other options also exist, such as chattel mortgages, novated leases, and others that help you buy a car through your work and reduce what you pax in tax.

  • Dealer finance

A number of car dealers offer finance, and if you opt for this make sure you find out about interest rates as well as all associated fees and charges at the onset. Also find out if you’ll have to make a balloon payment at the end of the term.

What do cars cost? New and used

Buying a new or used car requires that you pay more than just the purchase price of the car in the form of various on-road costs. Every state in Australia charges stamp duty as a percentage of the car’s purchase price, and this varies from state to state.

Buying a car also requires that you get Compulsory Third Party insurance, as it provides cover to people who might face injuries because of the driver’s fault (which could be you or anyone else). While getting other forms of insurance covers is not compulsory, you can benefit through comprehensive and other kinds of insurances, but they cost more. Find out about these in the section below.

If you’re buying a new car, you would have to set some money aside for extras like registration, number plates, and delivery charges, as well as any add-ons you’ve requested.

Car Insurance: The basics

Australian law requires every vehicle owner to have insurance that provides cover in case of injury or death of individuals involved in motor accidents, and this comes in the form of Compulsory Third Party (CTP) insurance. Different Australian states have different regulations when it comes to CTP, so it’s best that you contact the relevant transport authority for more information. Details of other insurance options for car owners are as follows:

  • Comprehensive Insurance. This provides cover for repairing or replacing your vehicle, irrespective of whether you cause the accident or someone else. Additional benefits can include cover for transportation expenses and emergency repairs.
  • Third Party Property Cover. Third Party insurance will cover you for damages you might cause to another vehicle or someone else’s property, but it does not provide cover for expenses you might incur to repair your car.
  • Third Party Fire and Theft Coverage. This type of insurance offers cover against the theft of your car as well as damages incurred during its theft. It provides cover against fire damage, not just to your car but also to property damaged as a result of the fire.
  • Extras. You have the option of getting additional coverage which includes getting a replacement car for your existing one if something happens to it. You can choose to select your own repairer and you can protect your ‘no claim bonus’ as well.

Find the best car insurance policy for you

Now you’ve got the car, how much does it cost to keep it running?

Think about running costs you’ll incur over time before you buy a car because these can have a significant long-term impact. By simply opting for a smaller model over a larger one, you could save $2,000 to $3,000 per year.

Factor in the cost of financing the car and its insurance at the onset, and also take into account that its value will only depreciate with time. Buying a fuel-efficient car can lead to long-term savings when compared to buying one that is not, and expect to shell out more in the form of servicing and maintenance costs if you buy a big car.

You’ve already got a car, how much will it cost you to upgrade?

When it’s time to upgrade your car you have two basic options; you can sell the car on your own or you can trade it in as part of the deal on a new car you choose to purchase.

  • Sell it on your own. There’s a good chance you’ll get a better price for your existing car if you choose to sell it on your own, but the process can be time-consuming, so ask yourself if you’re ready to go through the grind.
  • Trade it. Many car dealerships allow you to trade your old car when you’re buying a new one, but the price they offer does not include the profit they plan to make later on. If you plan to trade-in your car, settling on the new car’s price before negotiating your car’s trade-in price can be a good idea.

Tips:

  • If there’s a debt connected to the car, the law of some states is that the buyer takes on the responsibility of the debt after buying the car. As a result, take some time to go through the ‘Personal Property Securities Register’ to find out if the car in question has any unpaid debts.
  • Finding out how much your old car is worth is not difficult, given that there are some reliable websites that give you this information by asking you a few simple questions about your car. You can also peruse some car sale websites to see what comparable cars are selling for.

Getting the most from your new car

Owning a car requires you pay attention to it on an ongoing basis, and optimum maintenance involves multiple factors.  Here are some basics to keep your car going:

  • Oil. Check engine oil levels regularly, regardless of how old your car is. Use the right grade of oil and don’t exceed the maximum recommended level.
  • Tyres. Check tyre pressure at least once a month and once every two weeks when cold. If the tyres’ treads get to 3mm or less, you should replace them as soon as possible. When they get to 1.6mm in tread depth, they become legally unroadworthy. If you experience vibrations in steering, the tyres might need balancing.
  • Battery. While most new batteries are maintenance-free and don’t require topping up, if your car uses an older battery you would have to top it using distilled water from time to time. Check the battery’s terminals to make sure they’re clean, and you can wipe them using a damp rag and detergent if required. Replacing a battery that’s three to four years old makes sense because you never know when it might stall.
  • Washing. Wash your car regularly, and use wax from time to time so the body remains corrosion-free. Washing the engine once a year is good because a cleaner engine runs cooler when compared to a dirtier one. While you can get the engine steam cleaned professionally, you can also do it on your own, but if you plan to do it on your own make sure you take due precautions.
  • Spark plugs. Spark plugs require replacement every 50,000 kilometres to ensure optimum engine performance and fuel efficiency.
  • Fuel economy. Don’t keep unnecessary weight in your car, because an added 45kg can decrease fuel efficiency by around 2%. Keeping the tank filled to at least one-third its capacity is ideal because a steady flow of fuel to the engine is otherwise not possible all the time. Low revolutions per minute are best for fuel efficiency, so accelerate smoothly. Keep a track of how many kilometres you drive between each refuelling, and watch out for noticeable differences.

Bonus tips to help those buying a car

There are a number of tips that can prove invaluable to anyone who is buying a new car. Using some or all of these tips during the car buying process could help you to get the right vehicle at an affordable price – and could help you to avoid disappointments or over commitment in terms of your finances. Some of the important considerations that you need to think about when you are planning to buy a car include:

  • Working out your finances.
    Unless you are lucky enough to have the cash you need to buy your car in your savings, the chances are that you will need to get finance in order to make your purchase. Take a look at the options available to you based on your financial circumstances and credit status and then work out which is likely to be the most cost effective and easily accessible option. This could include finance such as dealership finance or a car loan from one of a range of lenders. You should look into finances before you start spending time looking for a vehicle, otherwise you could end up wasting a lot of time if you cannot get the finance you need or cannot borrow as much as you thought you would be able to
  • Working out affordability.
    You need to look at how much you can afford to repay on a car loan each month, so that you can then determine how much you can afford to borrow for your new car. This will then enable you to look at cars that are going to fit in with your financial situation rather than spending time looking at cars that are out of your range
  • Looking at when to buy.
    Unless you are desperate to purchase a car right away, it can also pay to consider the best time to buy a new car in order to boost your chances of getting a good deal. Often, dealerships will offer some great deals around Christmas time, as at this time of year most consumers are splashing the cash on Christmas gifts rather than on new cars, leaving dealers struggling to make sales. Dealers are also often looking to get rid of older stock between July and October to make room for newer models, so you might get some great deals during this period too
  • Getting the best deal.
    It is important to get the best deal possible on your new car. Comparing different cars and dealers can help to do this, as can buying at the right time. However, it is also a good idea to ask to see the invoice price of the car from the dealer, which is the price that the dealership would have paid the manufacturer. You are then in a better position to negotiate and you should aim for a price that falls between the invoice price and the price that is advertised for the car that you are interested in
  • Check the car before you commit.
    Even if you are buying a brand new car, you want to ensure that you are comfortable driving it and that there are no defects to worry about. You may therefore want to consider getting the car inspected before you buy (this is important if you are buying a used car) and you should always ask to take the vehicle for a test drive so that you can ensure that the vehicle is one that you are comfortable driving

Finding the right car doesn't have to be difficult, and finding a way to pay for it doesn't have to add to your struggle. Take on board some of the tips from this guide and you'll be setting yourself on a smoother road to your next car.

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IMB New Car Loan

This fixed rate new car loans up to 2 years old features no early repayment penalties

RACV Car Loans

Enjoy this fixed rate new car loan offer from RACV. No ongoing fees.

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