10 tips to buying your first car

Buying your first car is an exciting rite of passage. Whether you've just turned 18 or you're buying your first car a little later in life, you don't want to end up with a lemon. Here are a few things to consider before getting your first set of wheels.

1. Set your budget

• Figure out what your budget is. Take a look at your savings, income and debts. This should give you a ballpark figure of what you can afford to spend on a car. Be flexible, but always be firm with your maximum price.
• Making a budget should also involve figuring out whether you can afford to pay outright, or take advantage of a finance plan. If you've saved up a chunk of cash, you may save on interest payments by paying outright, whereas borrowing to buy can give you greater wiggle room in the budget if you have a regular income and can easily take care of payments. But, getting a car loan is a big responsibility and not something to take lightly. Make sure you do your research, and do a budget so you know you can afford your repayments.
• Check out the Money Smart website for more tips.

When setting your budget, it is also important to keep in mind any long-term associated costs, such as fuel, registration, insurance and maintenance costs.

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2. Know the difference between 'want' and 'need'

• Now that you've narrowed your options down according to your budget, it's time to make your list of needs vs. wants – and there's definitely a difference.
• For example, you may simply need a reliable car that gets you from A to B, and will last for at least a few years. That leather upholstery and wireless charging pad? Those probably belong in the 'wants' list.

3. Understand the lifetime cost

When buying your first car, think about the lifetime cost of the vehicle. In the short term, the price may seem pretty low. However, in the long-term, the lifetime cost of the car may be far more than you bargained for.

The lifetime cost of your car includes on-road costs, such as:

• Fuel
• Maintenance
• Vehicle registration, and
• Car insurance.

Luckily, there are some great tools to help make things easier. ASIC's MoneySmart Cars app helps break down the true cost of buying and running a car. On the app, you can input loan options and other hidden costs to discover the lifetime cost of buying and running a car, as well as alternate finance options.

Depreciating value

• It's no secret that new cars lose their value quickly. But not all cars depreciate at the same rate. As a general rule of thumb, the higher the demand for a car, the less it tends to devalue over time.
• According to Canstar ¹, new vehicles depreciate an average of 19% in the first year. Some cars lose as much as 40% of their value in the first year. In the second and third year, this may drop by another 15%. However, not all cars are a bad investment. New cars tend to be more fuel efficient, less prone to breakdowns, and covered under their warranty.
• If you're buying a new car model, it's worth considering the resale value – the price you'd reasonably expect to get for your car if you resell it. This is important if you find yourself locked into a finance plan at the new car price, for a car which will depreciate in value over time, especially as newer models hit the road.

4. Do your homework

• There's no one-size-fits all car for first car buyers. The main thing to consider is whether the car make and model will meet your present and future needs and if you can afford the on-road costs.
• Come decision time, you can avoid making a rushed decision. Consider your lifestyle and how you'll use the car, such as if you're planning to start a family soon, to narrow down the size and model that best fits you.
• Whether it's a new or used model, investigate how well it's been performing and read any third party reviews. It's also good to consider the vehicle's safety performance – again, car reviews could help here.

5. Decide whether you want a new or used car

Factoring in your budget, needs and lifestyle, weigh up the pros and cons of a new or used car. There's no right or wrong answer – it'll come down to your unique circumstances.

New cars

• Come with a new car warranty
• Can include features like improved fuel efficiency and the latest technology
• Are more expensive
• Depreciate in value quickly
• May attract higher car insurance premiums.

Used cars

• May not come with a warranty
• Require you to check that they're debt-free before you buy
• May come with unexpected problems or be more likely to need repairs
• Can still come with great features (especially if they're only a few years old)
• Are usually less expensive
• May attract lower car insurance premiums.

If you're considering a used car, bring along someone who's bought one or knows what to look for. Check the odometer matches the service history logbook and consider having a mechanic inspect the vehicle.

6. Buy from a private seller, dealership or auction

Next, you need to decide where you'll buy it. If you're buying a new car, you'll head straight to a dealership. If you're buying second hand, this could be done at a used car dealership, with a private seller or at an auction.

Licensed dealer

• Car dealerships tend to be more expensive than private sellers. Depending on your state, car dealers may have to offer a statutory warranty for cars under a certain age/that have done under a certain number of kilometres. Again, do your research.
• Don't be pressured into buying a car if you're not 100% sure. Don't sign anything you don't understand. And remember, dealer finance isn't always the best deal – shop around!

Private sale or auction

If you're buying a car in a private sale or auction, always check for the following paperwork:

• Proof of ownership
• Current registration paperwork
• State roadworthy certificate, and
• Safety check report (sometimes known as pink or green slip, or roadworthy certificate).

Check on the Australian Government Personal Property Securities Register (PPSR) for any outstanding debt owed.

7. Decide whether to buy outright or finance your car

If you're considering purchasing a car with a loan, weigh up whether the additional fees and interest on the loan are worthwhile. If you pay for a car outright, it may take you some time to save enough. Financing a car means you can get the car straight away, but you'll end up paying more money in fees and interest. Consider talking to an independent financial advisor if you need advice on the best option for you.

Leasing vs. buying a car

Some people choose to lease a car – especially if the vehicle is used for business purposes. If you finance your car, you may have higher monthly costs than leasing, but you'll own something at the end. Leasing a car is less expensive, but you are essentially renting it.

8. Take a test drive

To ensure you're 100% certain on a vehicle, take it for a spin before buying. A test drive lets you experience how the car responds on the road, and gauge its condition. This can help you decide whether it's the right one for you.

9. Shop around and don't be afraid to negotiate

Many first time car buyers fall into the trap of accepting the first offer without shopping around. Browse around and see if there's a better deal out there. If you know the market value, you may be able to use that knowledge to negotiate.

10. Check out your car insurance options

• If you're considering getting a new car, it's good to know about your car insurance options. Bingle can help! With our Third Party Property Damage Car Insurance, you're covered for accidental damage to someone else's vehicle or property caused by the use of your car. With our Comprehensive Car Insurance you're covered for accidental damage to someone else's vehicle or property caused by the use of your car, plus accidental loss or damage to your car, including damage caused by collisions, theft and natural events.
• Compare Bingle's car insurance options and get a quote to see how much your insurance would cost. You may also want to check out our Car Insurance for P Platers article.

Find out more about car insurance

¹ Canstar - Top 10 cars that depreciate slowly.

The information is intended to be of general nature only. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon the information. Please make your own enquiries.