Deciding What New Car to Buy
Step 1: What type of new car do you need?
If you determine your needs instead of your wants, you will soon discover what the right newcar is for you. Take some time to think about what you use your car for. Too often, people choose a newcar because it has an eye-catching style or it is a trendy favorite. If you go in this direction, you can easily break your budget or have to go car shopping again soon. Make sure your needs, not your wants, drive your decision.
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?
Step 2: How much will you spend on a new car?
Whether you decide to lease or buy your new car, establishing a monthly payment that will fit into your budget is a crucial first step. How much should this be?
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.
Step 3: Buy or lease the car?
A lease requires little or no money up front and offers lower monthly payments. But when the lease ends you're left with no car.
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
Advantages of Leasing
- 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.
- 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
Step 4: Have you considered all new cars in that class?
The new car market is filled with great products and it can be difficult to keep up with all the new models (and changes to old models), so it's important to do the research. A site like www.redbook.com.au lists all (or at least most of) the models on sale in Australia and can be handy for comparing features between makes and models.
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).
Step 5: Have you considered all of the costs of ownership?
Here is an often overlooked fact of car ownership: one car might be cheaper to buy, but more expensive to own. Why? Even if two cars cost about the same to buy, one can depreciate at a different rate or cost significantly more to insure or maintain. Before you commit to one car, you should estimate the long-term ownership costs of the vehicle you are considering. These include depreciation, insurance, maintenance and fuel costs.
Did you know that depreciation is almost always a bigger cost than fuel in the first three years of ownership?
Step 6: Research options.
You should now have a good idea about what car will work for you. Maybe there are a few cars that fit your criteria. It's time to narrow it down.
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).
Step 7: Schedule an appointment for a test drive.
At this point, you can contact us here at CarBroker.com.au and we will guide you through the rest of the way. We can organise test drives at dealers convenient to your location.
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.
Step 8: Test driving your new car
When you arrive at the dealership, you should make it clear that you are not yet ready to purchase as you are still doing your research.
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.
Step 9: After the test drive.
After the test drive, you should leave the car dealership. You will probably need to drive other types of cars at other dealerships. It's a good idea to do all of your test driving in one morning or afternoon. Driving the cars back to back will help you uncover even minor differences, which will lead to a more educated purchase decision.
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.
Step 10: Researching the Price Online
Note: Car dealers often usually quote prices excluding "on the road costs" and in some cases without GST, thereby neglecting to mention several thousand dollars that you need to pay in order to take ownership. You should always ask for the total on the road cost, including registration.
If you prefer to research new car prices online, we provide the following links to sites that have pricing information:
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, rust 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.
Step 11: Making the new car purchase.
You should now have considered all the cars in the class that interest you. You should have a good idea what you can afford. You should know if you want to buy or lease your next car. You should have test driven your top choices.
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.