6 things to think about when buying a car
Whether it’s new or used, buying a car isn’t something we do very often. It might be your first big purchase, so it’s something you don’t want to get wrong.
Before you hit the dealerships or the internet, consider these things first.
Do you really need a car?
Aside from the initial financial outlay, there are many ongoing costs associated with having a car to consider, such as annual registration and insurance fees, petrol costs and regular servicing.
If it’s just for one or two trips a week, have a good think about whether you really need a car. Consider and research the cost of alternatives like public transport, Go Get, taxis or Uber before you make your final decision.
How much can you afford?
If you do decide to go ahead and buy a car, what you buy will depend on what you can afford. You may prefer a new car, but to get all the features you need you might only be able to afford a used one. You can research Australian car values online at www.redbook.com.au.
If you’re not sure how much you can afford, take a close look at your current incomings and outgoings. If you’re an AMP customer, register or login to My AMP and select ‘manage non-AMP accounts’ to access AMP's Money Manager tool, which makes tracking your money in both your AMP and non-AMP accounts easy.
If you don’t already have a budget, AMP's budget planner calculator can also help shed some light on your financial position.
What features do you need?
You might want an expensive European convertible but it might not be the most practical car for your needs – or your budget.
If you’re going to be doing a lot of driving fuel efficiency might be a requirement, you might only be licenced to drive an auto and not a manual or perhaps you need a large boot or seven seats? Separate your must-haves from your nice-to-haves to discover your real criteria.
How will you fund your purchase?
If you can, it’s a good idea to save up before making your purchase rather than taking on debt. We can show you how to save for something big, while the new AMP Bett3r Account makes it easy to set a savings goal and allocate money towards it regularly.
If you do decide to borrow to buy a car, familiarise yourself with the different finance options available, including dealer finance and personal loans.
New or used? Or lease?
Buying a new car has some obvious advantages. As it hasn’t been driven by anyone else, it should be in perfect condition and last for many years.
Many new cars also come with a five-year manufacturer’s warranty and capped-price servicing at regular intervals to maintain the warranty.
And once you’ve settled on the make and model, you can specify a whole range of fittings and finishes to get the car exactly as you want it.
As cars depreciate by 19% during their first year of ownership and by a further 15% in the second and third years1, you can make substantial savings by buying a recent model used car. By doing this you may be able to afford extra features that’d be beyond your budget if you were purchasing the car brand new.
However, a major disadvantage is that you’ll never know how or where the car has previously been driven, and those things could result in increased maintenance costs.
Leasing a car effectively means you rent a car under a contract that allows you to drive an average number of kilometres each year.
Leased cars are covered by warranty and are usually new models, and they also have the advantage of enabling you to upgrade the car every two or three years.
Less money is required upfront when leasing a car, but with the monthly repayments as well as other fees and charges it can still be costly, and while in some cases you can by the car outright at the end of the lease, in most cases you don’t end up owning an asset.
Private purchase or dealership?
Whether you buy privately or through a dealership may depend on whether you already own a car that you’re looking to trade-in.
Second-hand cars bought through a dealer may also come with a warranty, as car dealers have to provide a warranty on cars that are less than 10 years old and have travelled less than 160,000km.
Remember that even though you’re buying from a business you can still negotiate the price and you may be able to get extras such as registration or dealer delivery fees thrown in for free.
You can also haggle over price if you opt for a private purchase, but don’t skimp on getting a Personal Property Securities Register check, which will tell you whether the previous owner still owes any money on the car and will protect you from having the car repossessed.
To further protect yourself, always check the paperwork, including registration and proof of ownership documents, as well as the roadworthy certificate, safety report or pink slip.
For extra peace of mind, you can also invest in getting a professional inspection done.
And whether you’re buying privately or through a dealer, always make sure you take the car for a test drive.
If you’ve made the decision to buy a car, be sure to shop around, take your time and do your research. And once you’ve made the purchase, enjoy your new set of wheels!
Source: AMP 16 June 2017
This article provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.