The Ultimate Guide To Buying A Car
This guide will take you through all the steps in the car buying process, while giving explanations, help and tips along the way.
Getting A Loan For Your Car
If you're buying your vehicle from a car dealer, you may consider dealer finance to be a convenient and simple solution to the problem. Just be aware that this convenience can cost you.
Dealer finance can sometimes be cheaper than getting funds from another loan source. But it can also come with extra terms and conditions, such as a hefty fee for paying out the loan early.
There are many other options available to you so take the time to shop around before signing anything.
Car Loan From Banks/Lenders
The main thing to remember is not to rush your decision and shop for your loan before you start to look at cars. Banks and finance companies offer specifiic car loans, or secured personal loans. They both can usually be used for cars.
Information You’ll Need To Apply For A Car Loan
This does vary depending on the specific lender and the chosen loan product. However, in general the required information includes:
- Proof of income and employment details
- copies of each applicant's most recent payslips, or a letter from your employer detailing income details;
- previous year's tax assessment;
- employer details for the past three to five years. Self employed people will also need to provide profit and loss statements and, possibly, tax assessment notices for the previous two years.
Proof Of Identity
If you are applying for a loan with a lender you already have other financial products with, such as your usual bank or credit union, proof of identity should not be required. However if you are not an existing member of the lender's institution you will be required to provide 100 points of identification.
To provide 100 points of identification you will need to show your lender at least one form of photo ID in addition to a number of other documents with your current address and/or signature, such as recent utility bills, bank statements or Medicare card. Your lender will be able to provide you with a list of accepted identification, along with the total points allocated to each.
- bank accounts;
- details of shares held;
- property, motor vehicles and other personal effects owned.
- Verification may be required for certain assets such as a rates notice for property owned.
Your lender will consider your debt repayment history as well as your credit history overall.
- credit cards;
- mortgage details;
- verification of other loans held.
Details Of Vehicle
Your lender will also need copies of relevant documentation regarding the vehicle you wish to purchase, such as the dealer's invoice, copies of current registration papers and proof of insurance cover.
Main Things To Look Out For In A Car Loan
Some of the variables you need to consider include:
- Term Of The Loan – personal or car loans often have a term of between one and five years, although some can run for up to seven years.
- Interest Rates – these can vary wildly depending on the term of the loan, financial institution offering the loan, loan amount and whether you want a variable or fixed rate.
- Other Fees And Charges – check the fine print for establishment fees, annual fees, fees for paying out the loan early and fees for defaulting on a payment.
- Insurance – does the loan require you to take out insurance to cover missed payments?
- Repayments – can you make repayments weekly or fortnightly? This can quite often save money over the term of the loan.
Choosing The Right Car
When you’re choosing a new or used car, there are some main things you should keep an eye out for.
- Kilometres & Age – This will help you compare the price to other similar cars.
- Services – Price & Frequency required to maintain the warranty.
- Price Of Parts – If something were to need replacing, how much would it cost? A general rule is that the European (BMW, Volvo, Volkswagen, Renault, etc.) made cars have the most expensive parts, while Korean (Hyundai, Kia) car parts are usually the cheapest.
- Electrical Features - Make sure they are all working, things like the A/C, Radio, Alarm, Sensors, Bluetooth/Handsfree, these are easy to check when you take it for a test drive.
- Fuel Efficiency – If the car is brand new, this will be displayed on a sticker on the car, if used, research online. The higher the litres used per 100 kilometres, the more petrol it will use. Somewhere around 5L/100KM is very good, while 11L/100KM or more is high.
It is also a good idea to get the car checked out by a mechanic before you buy. This can be arranged by calling a mechanic and getting them to come and inspect the car, or you can take it to them while you’re on a test drive. (Just let the car owner know you might be a while)
Where You Buy Your Car
The three main options are buying privately, buying from a car dealer or buying at an auction.
If you buy privately, make sure the owner has all the proper paperwork for the car and for themselves. Check their identity by asking for photo ID. Check the car by asking for the current registration papers, this will also have the VIN number on it, compare that to the VIN number on the car (Usually under the bonnet near the windscreen) You should also check that the vehicle does not have any other money owing on it, and that the owner selling it to you is the true and only owner, there are services online that do this for a small fee.
Buying From A Car Dealer
Buying from a car dealer is a safer option than buying privately or at an auction, as they can offer warranties.
Buying From An Auction
Buying from an auction is final, once you have paid for the car you have bought it ‘as is’, it is yours and anything that was wrong with or that goes wrong with the car is your responsibility.
Auctions can be a risky place to buy a car, as there is little protection to you as a buyer, they might offer big savings, but there is also a risk. If anything goes wrong with the car you cannot take it back, auction houses also have different laws applicable to them than car dealerships or even private sellers, governing what they can and can't sell, and how they sell their goods.
Extra Costs Of Buying A Car
- Car registration. (See State by State Registration Costs)
- Compulsory Third Party Insurance.
- Other insurance – if additional cover is required. (See Our Car Insurance Guide)
- Mechanical or other inspections.
- Dealer delivery charges.
- Government taxes and levies – including stamp duty and transfer fees.
Getting A Car Loan?
Now you have read all about how to buy a car, you can find out about more car loans by visiting our Car Loan Comparison Page. We have lots of loans and features listed, but just remember we don't compare all products in the market or all features to compare.