Which New Car to Buy?
Deciding What New Car to Buy
Here are a few questions to keep in mind when you start:
- Will the vehicle be a first or second car?
- Do you want a manual or automatic transmission?
- Do you really need four-wheel drive? Or all-wheel drive?
- What safety features do you want?
- Do you require a lot of luggage-carrying capacity?
- Will you be doing any towing?
- Will the car easily fit in your garage or parking area?
- How many people do you need to transport?
- What kind of driving do you most often do?
- How long is your commute?
- Is it important that your next vehicle not too heavy on the fuel?
As a rule of thumb, your total monthly car payments – whether you own one car or more than one – shouldn’t exceed 20 percent of your monthly take-home pay.
If you’re interested, we can help with pre-approved car finance, or a Car Loan Calculator.
Buying a car is more expensive initially and the monthly payments are higher. But at the end of the loan, you will own a car you can still drive or sell.
Other key factors that differentiate buying and leasing:
Advantages of Buying
- When interest rates are low, it makes more financial sense to own a car rather than lease it.
- No mileage penalty.
- Increased flexibility — you can sell the car whenever you want.
Advantages of Leasing
- You can drive a better car.
- You can drive a new car every few years.
- No trade-in hassles at the end of the lease.
Read more about different types of leases here
When considering whether to go for a more upmarket model of a cheaper car make vs. a more basic expensive make, remember that fleet buyers invariably choose the most basic model. When you go to sell, it will usually be much easier to sell the car with the higher spec compared to the more basic, expensive car. Additionally, if you like comforts and conveniences, you’ll appreciate the same choice.
The only exception here are cars for $20,000 and less. Because of the very tough competition around this price point, the model levels for the same car can vary from $19,000 to $25,000. When selling, it can be difficult to get good money for the higher spec as many buyers will take the attitude that he/she can have the same model car new for a very similar price (even though the spec is lower). The point here is that the price difference between the base model and the highest spec is over 30% (because of the low base price).
Did you know that depreciation is almost always a bigger cost than fuel in the first three years of ownership?
Car buyers have been trained to visit local dealerships to find the car they want. In the Internet age, this is a waste of time and money. Visit the manufacturers site and check what options are available. (See Step 10 below).
If you prefer to venture out to the dealerships yourself, be aware of the usual dealer tactics before you become a victim.
Ring a nearby dealership and explain that you are not yet buying – you just want a test drive. The standard trick by the sales person is to invent a reason for having to ring you back. He/she wants you in his/her database and will then ring you daily (or at least every second day) until you buy. In many cases he/she will also “give you a spray” when you buy elsewhere.
Some customers choose to avoid this by not giving out their phone number (e.g. saying it’s a silent number, doesn’t have a mobile and can’t leave a work number). At the test drive, they “accidentally” give the wrong phone number.
The goal of a test drive is to experience – as closely as possible – the same type of driving conditions the car will be used for after purchase. If you commute, drive the car in both stop-and-go traffic and at freeway speeds. This will let you check out the road noise levels and also see how hard you have to push the engine. If you frequently drive into the mountains, try to find some steep grades to climb. Drive over bumps, take tight corners at aggressive (but not dangerous) speeds and test the brakes in a safe location, such as a deserted car park. Get in and out of the car several times and be sure to sit in the back seat, especially if you plan on carrying passengers. In short, ask yourself what it will be like to live with this car for a number of years.
While you are evaluating the car, don’t be distracted by the salesperson’s talk. Turn the radio off — you can look at that later. A new car is a big investment; make sure you spend enough time really looking at it. And then, consider one last thing: your intuition. If you are uneasy about this car, follow your instincts. A vehicle purchase decision is too important (and expensive) to undertake without total confidence.
The sales person will do his/her utmost not to lose track of you. In some cases, he will even offer to go with you to your next dealership to look at another make. The best way to stop this from happening is not to tell him anything about where you are going and leave no phone number.
NOTE: The prices listed on the manufacturer site do not include government and dealer charges.
Dealer charges usually range between $1,200 and $1,500 (but sometimes exceed $2,000). You then have to add stamp duty on he total price.
Stamp duty (also called motor vehicles duty, depending on what state you live in) generally ranges between 2% and 5% of the cost of the car. The “cost of the car” is defined differently depending on where you live. In Queensland, for example, the cost is the recommended retail price of the car, plus accessories (including such things as carpet mats, paint protection, sunroof etc.). In most other states, stamp duty is calculated on the actual sale price of the car.
Stamp duty information can be found here:
Luxury car tax
The luxury car tax is currently 33%. It applies on every dollar above $59,133 (for the 2012-13 financial year). The fuel-efficient car limit for the 2012-13 financial year is $75,375. It applies on accessories too, so educate yourself about how you should deal with accessories before you buy. Car dealers make a profit on such items and are keen for you to have it done by them, even though you will pay excessively.
Now it’s time to narrow your choices down to one car purchase it.
If your choices are similar cars (which is very likely), the prices will be similar. They are most likely competing against each other, and any discounting by one is usually matched by the other.