Thinking of purchasing a car?
Whether you’re a first-time driver, starting a family and need to upgrade, or moving somewhere where public transport isn’t an option, this handy all-in-one guide explains the car buying process, step-by-step.
1. Work out what you can afford.
Figuring out what you can afford to pay for a new car means taking a good look at your finances. Here are some things to think about when deciding on a ballpark price tag for your new wheels:
- your savings. While it can be difficult to save up the full amount for a new car, it could be a good idea to contribute some cash to the purchase so that you borrow less. How to set up a savings plan
- money from selling your old car. If you already own a car, consider how much you could get by selling it
- borrowing. For any amount you decide to borrow, you’ll need to factor the regular repayments into your household budget. How to create a budget
- your ongoing cash flow. Are you in a good place financially to cover repayments and running costs, like petrol, insurance, servicing, and registration? Our Living Expenses Calculator is a useful tool for understanding your weekly, monthly, and annual spending
On-road costs
These are extra expenses you may need to pay on top of the car itself.
Buying brand new
Legislation requires the advertised price for a new car to include GST and luxury car tax, if applicable. The following on-road costs may also apply:
- dealer delivery costs. When you buy any car from a dealer, new or used, the final price can include extra costs for getting the vehicle ready
- stamp duty. Stamp duty is the tax you pay when ownership of a car is transferred to you. Different rates apply depending on the state or territory where you’re buying, so check with your local road authority to find out how much you’ll be paying on your next car
- registration. Registration is an upfront cost you’ll pay for your new car to be road legal for the first year. This amount will also vary across the states and territories
- CTP insurance. Just like registration, compulsory third party (CTP) insurance is a legal requirement for taking your new car on the road. In the event of an accident, CTP insurance covers third parties for the cost of any injury or death caused by your vehicle. CTP from a separate insurer is required for vehicles registered in NSW, the ACT, Queensland and South Australia. In other states and territories, your CTP premium is included in your registration fee.
Buying used
When you buy a used car, stamp duty will still apply when ownership of vehicle is transferred to you. Any registration and CTP insurance that’s still valid for the vehicle will be transferred to you.
It's a good idea to check when the registration and CTP insurance (if applicable) are due for renewal so you can plan for these costs in your future budget.
2. Decide what type of car you need.
Once you’ve got an idea of how much you can spend on your new car and the ongoing costs involved, it’s time to start thinking about what kind of vehicle you need.
Here are some good questions to start with.
1. Where will you be driving? Country roads or off-road adventuring might call for a bigger vehicle or manual transmission, while a small hatchback could be more suitable for city driving
2. How much space will you need? How many passengers will you need to move around? Is there enough room for cargo and child car seats?
3. What engine size should you look for? Do you need towing capacity for a trailer, caravan, or boat? If you do, a bigger engine could be high on your list of priorities
4. Which safety features are important? g. automatic collision warnings, Autonomous Emergency Braking (AEB), Lane Departure Warning (LDW)
5. Is resale value important? Choosing a make and model of car that’s popular with used car buyers might be important if you’re planning to upgrade again in a year or so.
3. Where to buy.
The pros and cons of going via a dealer, private sale, ex-demo, or auction.
Dealer
Pros.
- Gives you access to a range of cars all in one place
- Some dealers are required to offer a statutory warranty and/or cooling off period, depending on your state or territory
- Dealers are obliged to run background checks to ensure no money is owing on the cars they sell
- A dealer can make it easier to upgrade by offering trade-in value for your old car as part of the transaction.
Cons.
- Likely a higher cost than private sale as the dealer needs to recoup their costs.
Private sale
Pros.
- You’re likely to have more bargaining power to get a better price, particularly if the owner has had their car on the market for a while.
Cons.
- If you have problems with your new car, you won’t have any purchase protection. This makes it very important to get an independent inspection if buying privately
- You’ll need to do your own background checks to verify the car’s service and finance history
Ex-demo vehicles
A demo car is a vehicle owned by a dealership and used for test drives, demonstrations, or courtesy cars. While they aren’t brand new, they are usually in good condition with low mileage.
Tips for buying a demo vehicle:
- look for a demo vehicle with less than 5,000km on the odometer and under 3 months old
- expect a discount of $2,000 – $3,000 off the new purchase price
- be sure to check the remaining warranty and registration are included in the price.
Buying at auction
Car auctions are known as the place to go for a bargain car, particularly if you don’t have your heart set on a particular model.
However, the quality of cars up for grabs can vary, so you’ll need to do your research on what’s available before you turn up and bid.
You’ll also need to know what to look for when you inspect a car on the day. If you’d like to really bid with confidence, it may be possible to organise an independent inspection in advance.
You generally can’t take the car for a test drive which can be a real drawback when buying a car this way.
4. Inspection and test drive.
You’ve found a car and it’s within your budget – now is the time for arguably the most important part of the car buying process: meeting with the seller for an inspection and test drive. Here are some key things to keep in mind.
- Take your time. Be thorough – the more time you set aside to examine the interior and exterior of the car, the more you will notice. Inspect the bodywork and paint, tyres, engine, and check that all the lights, equipment, and accessories are working as they should
- Don’t be afraid to ask the seller questions. How often did they have the vehicle serviced and is there an up-to-date logbook? Why are they selling? Where did they purchase it from?
- Map a long test drive. There are things you can miss on a short run. Make sure your test drive includes parking, low-speed manoeuvring, and, if possible, highway driving. Listen for any unexpected noises or rattling, check for any engine lights, and pay attention to the steering, braking, transmission, and exhaust.
For more tips, read our article on how to inspect and test drive a used car.
5. Finance options.
Dealer finance
If you’re looking to buy a car from a dealer, it can be convenient to arrange finance with them, too. Getting a loan this way can sometimes help you get a lower advertised interest rate as they want to close the deal, however, it’s important to read the fine print.
Here’s what to look out for:
- extra fees that may add to the overall cost of the loan. E.g. annual fees or charges for making extra repayments or paying off the loan early
- balloon payments. Some car finance arrangements are based on making lower payments over the life of the loan, with a large cash payment at the end of the term. If this is an option you’re considering, make sure you’re comfortable you can cover the balloon payment at the time it’s due.
Car loan
One of the biggest benefits of arranging your own finance is that you have the freedom to shop around for a loan that suits you best. As you’re not buying and getting your loan from the same place, you can pick and choose the loan term and features that match your budget.
What to consider when comparing car loans:
- loan term. A longer loan term can make a loan more affordable with lower monthly payments. But the longer the term, the more interest you’ll be paying over the life of the loan
- interest rate. The rate of interest you’ll pay on your loan. Most car loans will be fixed interest so the rate won’t change over the life of the loan
- comparison rate. This rate is described as the true cost of a loan. It includes the interest rate, and most fees and charges relating to a loan, reduced to a single percentage figure
- fees that apply. Check the loan terms and conditions for other fees, such as an annual service fee. It’s also important to be aware of any fees owing if you miss a repayment
- extra repayments. Some loans allow you to make extra repayments to pay down the balance before the end of the agreed loan term. If this is a feature, is there a limit on how much extra you can pay
- option for redraw. Some car loans will allow you to access additional repayments you’ve made. This may be useful if you need a cash boost for unexpected expenses.
Explore our car loans.
Get closer to your dream car, motorbike, or caravan with a great rate from Beyond Bank.
Still have some niggling questions?
Loans can be confusing, which is why we’re here to make the complicated stuff simpler. You can call us on 13 25 85 or visit a branch to speak with a Lending Specialist.
