buying a new car

Car Buying Guide: How to Buy a Car

How to drive away in the right car for the right price

Cars are a big investment, so it’s worth taking your time and making sure you’ve made all the right choices.

This car buying guide has everything you need to know about finding the perfect car at the perfect price.

How to choose a car

Narrow down your options so you can compare a realistic number of suitable cars. You might start by setting yourself a price limit and making a list of must-have features.

1. What’s your price limit?

How much are you willing and able to spend on a car? Ideally you’ll be able to set yourself a clear price ceiling and decide straight away whether you’re looking for a new or used car.

  • If your maximum price is “as little as possible” then you can probably focus on used and demo cars only.
  • If you’re flexible on price, you might try listing your must-have features first.

2. What are your must-have features?

What will you be using the car for? For example:

  • How many seats you need. If you want more than five seats, you can narrow your search down a lot further, typically into SUV territory.
  • City or country driving? If you’re planning on going off-road you might limit your search to 4WD or AWD vehicles.
  • Other factors. Do you need to tow heavy loads? Want plenty of leg room? Need enough boot space to transport furniture?

Your must-have features can help you work out whether you’re looking for a small passenger car, an SUV, a luxury car, a ute or anything else before you start searching.

What types of cars can I buy?

There are different places you might find your perfect car. The two main ones are dealerships and private sellers.

When you’re buying a car from a licensed dealership, the seller is legally required to disclose any major issues with the car, and will often be required to solve defects or problems with cars they sell.

When you’re buying a car elsewhere, it’s often going to be your responsibility to inspect the car thoroughly in order to make sure there aren’t any serious issues with it.

Where to buyWhat it isWhat it’s good for
Dealership (new car)Walk onto a car lot and shop for a new carGood for finding a wide range of options, test driving each of them and getting some expert advice.
If you want a new car and want to see a lot of options in one place, this might be the best choice for you.
Dealership (used car)Visit a used car dealer to see what’s availableGood for finding a lot of relatively affordable options all in one place.
If you’re after a used car but want the flexibility to shop around on the lot, or aren’t confident going to a private seller, then this might be the best option for you.
Private seller (used car)Buy a used car directly from a private seller, typically the previous ownerIf you’re after the best price possible, then buying used from private sellers is often the way to go.
But make sure you know how to check the car thoroughly before buying, including its service history.
Demonstrator vehiclesBuy a lightly-used newer model vehicle that’s been used for test drives, demos and other light purposes by a car dealershipThis might be a good option if you want to buy almost-new rather than brand new, and want to get a good price on a recent make and model.
However, the savings can vary and your options will naturally be more limited.
Demo cars might be fitted with extras that you don’t necessarily want but will have to pay for anyway.
Imported carsImport a car from overseasIt’s safe to say that this will never be the cheapest option as it involves a range of additional taxes and expenses.
However, sometimes it might be the only way to get a vehicle that isn’t available in Australia.
Car auctionsBid on vehicles at an auctionThis can be one of the most affordable ways of buying a car – it’s so good that car dealers often buy stock at auctions.
The downside is that the quality of auctioned vehicles and the quality of their discounts can vary, so you need to have a good sense of how much a car is worth, and how to properly inspect it, in order to get a good price. Also, you typically won’t be able to take the car for a test drive.
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Tips for haggling and tips for paying less

The number one tip is to know how much a car is worth. Look up the value of the make and model before heading in, so you have a baseline. If someone asks for more than that, you can ask why it’s so expensive.

From there, familiarise yourself with the different options and features you can get with the car. Decide which ones you want and which ones you don’t. These extras will most likely make an appearance while you’re buying from a dealer.

How do I inspect a car?

For new cars this might just be a test drive to check that it’s right for you. For used cars purchased from private sellers, you’re going to want to give it a thorough inspection, or take it to an independent mechanic for a check before buying.

Checklist for inspecting a used car

You’re looking for anything you’ll have to fix yourself, any damage that means it’s a dud, and red flags that might indicate the seller isn’t being honest.

Visual inspection

Check the body:

Give it a walk-around, but also stand at the front and back and look down the side of the vehicle. This can help highlight dents and other imperfections.

Check:

  • There are no signs of old accident, hail or other damage, and no chips or imperfections in the paint. You should know about every scratch on the car before buying
  • For improper sealing. Pop the hood, open the trunk and try all the doors and windows. It should all work smoothly and evenly
  • For panel irregularities. All body panels and doors should be flush

On the inside:

Pay special attention to the electronics and check that all the functions work.

  • Check the condition of all the upholstery
  • Check that all the lights are functioning
  • Ensure that the windows, air conditioning, audio and all other electronics are working
  • Where possible, lift the carpets and look inside the doors for any signs of damage or repairs

The engine

Turn on the engine to test it properly.

  • Warm up the engine by letting the car idle for a few minutes, then give the accelerator a quick push. If you see a puff of smoke then you might be looking at piston or valve stem problems.
  • Let the car stand for a while and check for oil drips or wet surface residue on the surface of the engine and under the car.
  • Check the water in the radiator. It should be clean and free of oil.
  • Check the oil filter caps. A creamy white substance there probably means a cracked cylinder head or leaking gaskets.

Specifics to look for

  • Paint. A new paint job on an old car might be hiding something, and you’re generally better off with the original paint. Watch out for any signs of painted-over imperfections, bubbles under the paint and mismatched paint on adjacent body panels.
  • Tires. If you’ll have to replace the tires after buying, then factor that into the cost and don’t pay too much for the car. Tires should also wear down evenly. If they’re not evenly worn then there may have been a previous accident, or the car might have other problems.
  • Glass. This can be expensive to replace, so pay special attention to any chips or cracks in the windows, indicator lights, mirrors and anywhere else.
  • Under the car. Don’t forget to inspect under the car. Rust often starts here, so look out for any signs of corrosion or other damage.
The test drive

As you drive, check that:

  • You can change gears smoothly and quickly
  • The engine power is appropriate for the car
  • The car tracks in a straight line and doesn’t drift. The car shouldn’t pitch on corners, and the steering wheel shouldn’t pull or try to straighten itself unduly
  • The brakes respond effectively
  • The electrics, dials and other interfaces are all working properly, and that the speedometer is working accurately
  • The temperature dials, car engine light and all other indicators are not showing problems
  • There is no irregular engine noise
  • You’ve paid attention to the suspension and transmission
  • The exhaust emissions are reasonable
  • All the headlights, tail-lights and interior lights work
The documents and information to get

You’ll want to get:

  • The car’s CTP insurance details. You should not test drive a car on public roads if it doesn’t have CTP insurance or is unregistered. Ask to see the certificate before taking it for a test drive, and check that the certificate details match the vehicle.
  • The VIN. This unique 17-digit code will generally be on the inside of the driver’s door. Record it for later if you plan on buying, in order to check the car’s history.
Checking the car’s history

If a car passes inspection and a test drive, the last thing to do before buying is to check its history. Unfortunately there’s a very good chance it won’t pass a history check. But that’s exactly why you need to do it.

You’re checking two things in particular. The first is whether there’s any finance owing on the vehicle, and the second is its service history, including previous repairs, whether it’s ever been reported stolen or written off.

  • PPSR check. This is how you check whether a vehicle is encumbered. With the car’s VIN number you can easily do it for free. If a vehicle is still under finance it usually means the seller bought it with a car loan and is now trying to sell it before the loan is paid off.
  • Service history. You can also do this yourself for free, but you may not be able to get full results.

If you don’t want to DIY, you can pay a car history service to check these for you. It generally doesn’t cost much and usually includes both a PPSR and service history check.

Making the purchase

When buying a used car from a private seller, you’ll need to transfer ownership to make it official. You should generally get all relevant documents at the time of purchase, including:

  • Vehicle registration
  • A PPSR notice if applicable

The seller will need to inform the state road authority that they’ve transferred registration and ownership of the vehicle, and you will need to accept the transfer. This can generally be done online through your state motor authority.

What to do if you find a problem...

A new car should be pretty much perfect. If a brand new car has any flaws, that should at least entitle you to a discount, or the dealer should offer a solution.

If you find any damage in a used car, you’ll have to decide whether you can live with it or will need to get it fixed. A scratch might not bother you, but any mechanical problems, worn tires or anything else that needs fixing might be a deal-breaker.

Factor in any repair costs you’ll need to pay and add them to the “sticker price” to get a sense of how much you’ll really be paying. If it comes out too high and the seller won’t budge on price, it might be time to walk away.

If it’s a problem that the seller has tried concealing, such as if you spot any painted-over rust spots, then you’ll want to think twice about whether or not you really know what you’re buying. Similarly, you probably don’t want to buy a car from a private seller if they refuse to let you take it to an independent mechanic for an inspection.

If a car is under finance then the seller should mention this. Ideally you won’t buy an encumbered vehicle, but you can if you want. You’ll need to have a plan for the finance; however, it’s not your problem until you buy the car so the ideal option might be to make sure the seller takes care of it.

If a car has previously been written off then you shouldn’t buy it, even if it seems fine. It’s almost certainly not as fine as it seems.

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How can I pay for my car?

There are a lot of different finance options. Sometimes you’ll sort it out before finding your car, and sometimes you’ll pick out your car and then sort out the finance.

In the long run there might be thousands of dollars of difference between the various finance options. Deciding on finance can be just as important as deciding on a car.

Paying for the car outright: Dip into your savings and pay for the car outright.

  • Pros: There’s no need to pay interest when you pay it all up-front.
  • Cons: You need to have enough.

Dealership finance: This is when you get finance from the car dealer. The dealer usually goes to a third party lender and plays middleman. Typically, both the dealer and the lender get paid out of the interest.

  • Pros: It can be convenient to get finance in the same place as you buy the car.
  • Cons: Might not be the most cost-effective choice. Dealers might have an incentive to charge more interest, and you’ll be taking out a loan in a high-pressure sales environment.

Car loan from a bank or car financier: A car dealer might offer you a loan on behalf of a bank or car financier, but you might go directly to the lender and cut out the middleman.

  • Pros: There is a wide range of options. For example, a good credit applicant might get more competitive rates, or you might choose to borrow only the amount you need and pay the rest with savings. You can also consider the loan terms and conditions at your own pace, outside the car dealership.
  • Cons: You need to make sure your loan matches your vehicle type. Sometimes there may be conditions around the types of vehicle you can get. For example, some loans might be for new cars only.

Finance from a car loan broker: You can also go through a broker that will find financing for you from one of its panel.

  • Pros: A broker can compare suitable options on your behalf to help find something to meet your needs. For example, bad credit applicants who keep getting knocked back by lenders might have more luck going through a broker.
  • Cons: Brokers charge additional fees for their services, and you’ll need to check the terms and conditions of their services.

Pre-approved car loan: This is when you get approval from a lender for a certain amount and then find the car afterwards.

  • Pros: It helps you know where you stand, and how much you can borrow. Pre-approval lets you know what kind of price range you can shop for, and might give you an edge when negotiating with dealers.
  • Cons: The amount you qualify for doesn’t necessarily include all expenses and other taxes, so it’s important to make sure you aren’t caught short.

Novated lease: A novated lease is an agreement between you, your employer and a lender. You make repayments through a salary sacrifice arrangement.

  • Pros: It can be an exceptionally flexible and extremely competitive option where possible. You can set it up in many different ways, and payments are made from your pre-tax earnings which can give you some tax benefits on top.
  • Cons: Novated leases are part of your salary package rather than a separate loan, so your employer will need to approve it. They can also be complicated.

Chattel mortgage: This type of finance is only available for vehicles that are designated at least 50% business use. It can be exceptional value for money, but may also be exceptionally complex.

  • Pros: Extremely flexible. Chattel mortgages are much less regulated than other types of vehicle finance. You might think of it as a way of drawing up your own terms and conditions with a lender, with the aim of finding a win-win deal.
  • Cons: It’s only available for business vehicles, and you need to know what you’re doing. It’s less strictly regulated than other types of finance, so if you’re not careful you might fund yourself with some extremely unfavourable loan terms.

What extra costs should I budget for?

The sticker price of the car itself is the main expense, but not the only one. You’ll also want to make sure you have enough to cover all related expenses, both during and after purchase.

Additional costs when buying

  • Stamp duty: This is a type of tax. When you buy new or used from a dealer it’s generally built into the sticker price, but when you buy from a private seller, stamp duty needs to be paid when transferring ownership. You’ll typically see this as a “dutiable value” field on the transfer documents. The amount can vary widely, but for a typical used car one might expect to pay around 3% in stamp duty. See how it works in each state to find out how much you’ll have to pay in stamp duty.
  • Extras and modifications: The price you get at a dealer will depend largely on which features and extras are thrown in. This can turn the price thousands of dollars either way. Generally, it might be a good idea to turn down any extras you don’t want in order to keep costs down. The same might be true when buying used from a private seller with a modified car. If you don’t care about the mods, you might want to give it a miss to avoid overpaying.
  • Registration: For new cars you’ll have to pay a fee to register it. And if you’re buying used, you’ll need to pay a fee for the transfer of registration/ownership (generally around $20 to $30 depending on the state). The cost of renewing your registration or registering a new car varies widely depending on your state, whether you can get any concessions and other factors.

Additional costs after buying

  • CTP insurance: Compulsory third party (CTP) insurance is the mandatory car insurance to help cover the cost of injuries sustained on the road. It works differently and costs vary depending on your state. In all states except NSW it can be attached to your car registration, and built into the cost of new and renewed registrations. In NSW your CTP insurance takes the form of a separate “green slip” and you can shop around for better prices from different insurers.
  • Additional car insurance: It’s not mandatory, but additional car insurance is generally a good idea. The cost can vary widely depending on the type and quality of cover, the insurer and your personal circumstances.
  • Maintenance and fuel: It’s worth planning for operating costs. The cost of fuel and routine car maintenance will depend on the type of car and how much you drive.
  • Car loan repayments: If you’re not careful these might become a major headache. You should know how much the repayments will cost before taking on a car loan.

In some situations you’re likely to encounter other miscellaneous expenses too. For example, the luxury car tax (when buying a particularly expensive car), licence plate transfer fees (if you’re buying the plates from the old owner – more if they’re custom plates), stamp duty on the cost of your car insurance (built into your insurance payments) and more.

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Are cooling off periods legal? Can I get a refund?

It’s always a good idea to understand your consumer rights when making a big purchase.

The main ones to know are:

  • Cooling off periods. This is how long you have to change your mind and get a refund after buying a car. It works differently in each state.
  • Your car warranty rights. All cars bought from a licensed dealer in Australia, both new and used, will come with a consumer warranty to cover defects and failures shortly after purchase.

Cooling off periods

If you change your mind after buying, such as if you realise you can’t afford the financing or just got a bad deal, then you have a limited time to contact the dealer in writing, cancel your agreement and get a refund.

This period of time is the “cooling off period”. It works differently in each state, but in all cases, the cooling off period will only apply to purchases from licensed car dealers. It is not available when buying at an auction or from a private seller.

he cooling off period is one day, and usually ends at 5pm the day after purchase.

It only applies to cars purchased under linked finance. This is when the financing is provided or facilitated by the car dealer. For example, if they either offer a loan themselves or refer you to a third party.

  • It is waivable. You can agree not to have a cooling off period if you want.
  • A fee of the lesser of either $250 or 2% of the purchase applies if you cancel within the cooling off period.
  • It is available for both new and used cars.

The cooling off period is three days from the day of purchase, excluding weekends and public holidays.

It applies to most personal motor vehicle purchases made from licensed motor car traders.

You can terminate the agreement within this time period by contacting the seller in writing.

However:

  • The cooling off period will end immediately once you take possession of a car.
  • A fee of the greater of $400 or 2% applies if you exercise this right, or $100 or 1% for a sale that takes place off site, such as if a dealer delivers the car to your workplace.
  • It’s only for personal purchases. There is no cooling off period for vehicles purchased in the name of a company, a body corporate, or if they’re classified as a commercial vehicle.

You have three days from the date of purchase to change your mind. Termination of the agreement must be done in writing.

  • The cooling off period only applies to purchases from licensed dealers.
  • Deposits may not be fully refundable.
  • The dealer is entitled to keep the greater of either 1% of the purchase value or $100.

In Queensland, the cooling off period only applies to used cars purchased from licensed dealers.

It is for one business day and ends as soon as you drive away with the car (except if you’re just test driving it, or taking it to a mechanic for inspection). Within this time, you can cancel the agreement in writing, in person, by mail or by fax.

  • There is no cooling off period for new cars.
  • It ends at 5pm the day after purchase, or as soon as you take possession of the car. If the dealer closes before 5pm, it’s pushed back a day.
  • There is no fee for exercising the cooling off period. Instead, the dealer can charge a non-refundable deposit of up to $100. If you go ahead with the sale then this amount is taken off the purchase price. If you cancel the contract then they may keep some or all of the deposit.
  • There is no cooling off period on consignment vehicles. This is when the dealer is selling a car on behalf of someone else (generally the previous owner). The dealer must tell you that it’s a consignment vehicle and that the cooling off period doesn’t apply.
  • If you’ve traded in your old car as part of the agreement, the dealer will have to return it if you exercise your cooling off period rights.

The cooling off period is two business days. It only applies to second-hand cars and demonstration vehicles. During this time you can cancel the contract in writing.

If you want to take possession of the car immediately you can waive your rights to the cooling off period by signing a waiver form.

  • There is no cooling off period when purchasing new vehicles, buying at auctions or purchasing from private sellers.
  • The dealer can ask for a deposit of 10% of the purchase price. If you cancel the agreement under the cooling off period, the dealer can keep an amount equal to the lesser of either 2% or $100.

During the cooling off period, the seller cannot demand any payment other than the 10% deposit.

There is no cooling off period on motor vehicle purchases in WA.

There is no cooling off period on motor vehicle purchases in NT.

There is no cooling off period on motor vehicle purchases in Tasmania.

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Comparison of car loans you can apply for

Rates last updated October 19th, 2017
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Monthly Repayment Product Description
IMB New Car Loan
From 5.99% (fixed)
6.34%
$2,000
1 to 7 years
$0
$250
Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.
RACV New Car Loans
From 6.99% (fixed)
7.54%
$15,000
1 to 7 years
$0
$380
Enjoy this fixed rate new car loan offer from RACV. No ongoing fees.
NRMA New Car Loan
From 6.99% (fixed)
7.54%
$15,000
1 to 7 years
$0
$380
Purchase a new car with an NRMA Car Loan with a fixed rate term and no monthly fees. NRMA Members could save 1% on loan rates.
bcu Car Loan
From 5.9% (variable)
6.82%
$4,000
1 to 5 years
$8
$250
Borrow up to $65,000 for a car up to 5 years old. The New Car Loan from bcu allows you to make extra repayments and access a redraw feature
AutoCarLoans
From 5.16% (fixed)
6.64%
$15,000
1 to 7 years
$5
$381.80
AutoCarLoans can match you with a lender from its panel with rates starting from 5.16% p.a. Suitable for vehicles up to 2 years old.
NRMA Used Car Loan
From 7.99% (fixed)
8.54%
$15,000
1 to 7 years
$0
$380
Purchase a used car with an NRMA with a fixed rate term and no monthly fees. NRMA Members could save 1% on loan rates
IMB Secured Personal Loan
From 7.39% (fixed)
7.74%
$2,000
1 to 5 years
$0
$250
All approved applicants can access this competitive rate and use the loan to finance a range of purposes. Loan amounts up to $60,000 available.
RACV Personal Loan
From 7.99% (fixed)
8.54%
$5,000
1 to 7 years
$0
$380
You could use this personal loan offer from RACV to help finance a renovation, holiday or project.
bcu Secured Freedom Loan
From 9.08% (variable)
9.99%
$4,000
1 to 5 years
$8
$250
A competitive, secured personal loan that you can use for a variety of purposes.
Freedom Finance Car Loan
From 5.1% (fixed)
5.94%
$35,000
1 to 5 years
$0
$380
If you meet all the requirements you could get access to a range of lenders to finance a new or used car up to 4 years.
St.George Secured Personal Loan - Fixed Rate
From 8.49% (fixed)
9.6%
$3,000
1 to 5 years
$12
$195
Get behind the wheel of your perfect car with a competitive interest rate from St.George. Get an application response within 60 seconds.
Westpac Car Loan
From 8.49% (fixed)
9.67%
$10,000
1 to 7 years
$12
$250
Apply for a Westpac car loan and enjoy a great interest rate when you purchase a new or used vehicle.
Latitude Personal Loan (Secured)
From 12.99% (fixed)
14.2%
$3,000
2 to 7 years
$13
$250 (Loans under $4000 - $140)
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.
Bank of Melbourne Secured Personal Loan
From 8.49% (fixed)
9.6%
$3,000
1 to 5 years
$12
$195
A low rate personal loan from Bank of Melbourne with variable or fixed option.

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IMB New Car Loan

Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.

Westpac Car Loan

Apply for a Westpac car loan and enjoy a great interest rate when you purchase a new or used vehicle.

RACV New Car Loans

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

NRMA New Car Loan

Purchase a new car with an NRMA Car Loan with a fixed rate term and no monthly fees. NRMA Members could save 1% on loan rates.

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