Savvy Finance + Insurance, Australia's leading car finance brokerage institution has put together a definitive guide to planning, checking and eventually buying a car in 2016!
1. Set a definite budget and account for everything
Before buying a car, you must know exactly how much you can afford to spend on a car. The first thing you should do before you even consider what kind of car you want is to set definite budget.
You must also account for on road costs – one off costs and ongoing costs. An ongoing cost (unless you're mega rich) is car finance.
You should get some car finance quotes to see how much you can afford to pay your lender or bank back each month. If you find an amount that is suitable, you can get in-principle approval (which is a good thing; we will come to that a little later.) At this stage, you should check your credit history for errors. You should also see if you could improve it by paying off debts or increasing savings.
Next, you will have to figure out how much you can spend on fuel per week or month. You can choose more powerful or bigger vehicles if you can afford to spend more on fuel. Or, you may have to compromise with smaller, more fuel-efficient vehicles. You could try buying a hybrid, if you are willing to pay a bit more. Then, factor in scheduled servicing, insurance costs per year or month and registration each year.
2. Check your credit history
If you are planning to buy a car, you should check your credit history. Banks and lenders will look at your credit history first before they approve you for a loan of any kind. Sometimes, credit histories may have mistakes on them. For example, gas, phone and electricity companies sometimes record 'defaults" against your credit history even if you have paid a bill or figured out something with the company. This doesn't look good, so you should obtain a copy from an information broker such as Veda – usually for free – before you look around for car loans.
3. Research until you go blue in the face
Now that you have sorted how much you can spend, you should draw up your list of potential makes and models. Before whittling down the list, you should also think about where you'll be in five years' time – if you're thinking of starting a family, you should think of your car as an investment. A larger, slightly more expensive car right now might be a boon for your family in a few years.
Once you have taken that into your thinking, questions you should ask yourself are:
- How often will I be using the car? Is this for quick shopping trips or will I be commuting? Does it need to go on the odd interstate holiday?
- How many should the car comfortably seat on any given day?
- Do I really need modcons like climate control or satellite navigation?
- How safe is the car? Older cars may be cheaper but might not have modern safety technology such as Electronic Stability Control, curtain airbags – some may not even have ABS brakes!
- What would I like to have (but could live without?) Leather seats, extra pockets, sunroofs, rear park assist, etc.
Once you have this 'wants" and 'needs" list, you can start looking for cars that match your description. You should check online car classifieds, Trading Post, Auto Trader, the newspaper and dealerships for suitable cars.
4. Meet sellers and test drive – a lot
One of the downsides to buying cars is meeting private sellers (if you are buying used) or checking out heaps and heaps of dealerships until you have settled on what seems to be a good deal. You should always ask as many questions about the car as possible, and if you are buying used, insist on seeing the car's roadworthy certificate, logbooks and service history. If it does not have any of those, do not buy it!
Test-driving is an essential part of the process. Through a test-drive you can figure out:
- How the car handles on the road
- Where it'll fit and if it's difficult to park
- If it's roomy enough for you and your passengers (hubby and bubs!)
- If it has any annoying habits you'd rather live without
- If it's comfortable and all the electronics suit your needs
Never take a salesperson or private seller's word for it! If you are buying from a private seller, you may want to get an independent inspection done to make sure everything is above board.
5. Be prepared to wait – or walk away
Sometimes if you want to save some money on a car, you might have to wait. If you're getting into 2016 and need a car yesterday, it can cause some problems! But in the New Year, dealers have 'end of model runouts" and other deals on offer to get rid of older stock. They're usually a bit more eager to haggle at your level, too. If you have the pre-approval we mentioned, you can use this as a price floor to wrench an even better deal out of a salesperson. It's usually best to approach dealers toward the end of the month when they're bean counting and looking to make their quotas and sales targets. If you have your heart set on a car that ticks every box from price, suitability and good driveability, you should be prepared to walk away. Sometimes it's not worth getting suckered into a deal might get the better of you!
Question: What should we do if we cannot find a car within our budget?
Bill: If you can't find a car within your budget, you may have to start making sacrifices on your 'wants" and 'needs" list until you do find a car that suits your situation. There are many cars out there – sometimes it's just a matter of playing the waiting game.
Question: How can we check our credit history?
Bill: You can check your credit history by visiting a credit-reporting bureau or some of the independent portals such as http://www.mycreditfile.com.au or https://www.getcreditscore.com.au.
Question: What's your top five features that every car needs?
Bill: Now, I think the top five features a car needs is:
Good fuel economy – there is no excuse for needless petrol guzzling
Top of the line safety features such as Electronic Stability Control
Excellent ride comfort – if it's not comfortable, don't buy it!
High resale value – in case your family situation changes, as it sometimes can!
Easy to drive and park – a cumbersome car shouldn't cause headaches!
Question: If you were buying a private car - how would you check the safety?
Bill: If you're buying from a private seller, you can check the safety using the logbooks and mechanics reports. If mechanics tick off safety features as being in good condition, you can feel assured about the safety of car you're looking at. Good mechanics test brake pads, ESC, airbags and other safety features using electronic means. If you can't get a report from your seller, walk away.
Question: How easy is it to compare car loans? How would we go about doing this?
Bill: If you're going from bank to lender, it can be a long process. A better way is to have a broker on your side. Car loan brokers know the industry and can find many loans fast, giving you the best option. At Savvy, we provide an online quote, sourced from over 20 lenders and banks. We do the leg work so you don't have to!
Question: How can families who have bad credit overcome this to get a car loan?
Bill: Families who may have had trouble with credit in the past will find it harder to find finance. We at Savvy understand this, and offer finance to people and families with bad credit. We can help people find finance when other lenders have said no. It's all a stepping-stone toward correcting your credit, bit by bit!
Question: How important is car insurance?
Bill: Car insurance isn't important, it's vital. You should not (in most cases cannot) even drive a car without having insurance. Though third party cover is the minimum, you should aim to insure your car with comprehensive car insurance. You don't need to pay through the nose either – Savvy is also an insurance broker, and helps people find lower-cost, high-benefit premiums!
Question: Can someone who is self-employed get a car loan?
Bill: Absolutely. Self-employed people, entrepreneurs and investors can find good deals on car loans with the right help. You may need more documentation to help your case, but a good broker can find a deal that's affordable and suited to your needs. If you use the car for 50% business or over, you can even find loans such as chattel mortgages or hire purchases to save even more money.
Interview by Brooke Hunter